<PAGE>
As filed with the Securities and Exchange Commission on December 19, 1996
1940 Act File No.811-5003
1933 Act File No. _______
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. ___
Post-Effective Amendment No. ___
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. ___
BLUE CHIP VALUE FUND, INC.
------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1225 Seventeenth Street, 26th Floor, Denver, CO 80202
-----------------------------------------------------
(Address of Principal Executive Offices)
(303) 312-5100
-------------------------------------------------
(Registrant's Telephone Number, including Area Code)
Kenneth V. Penland, Chairman of the Board
1225 Seventeenth Street
26th Floor
Denver, CO 80202
--------------------------------------
(Name and Address of Agent for Service)
----------
With Copies to:
Henry S. Hilles, Jr.
Drinker Biddle & Reath
PNB Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
If any securities being registered on this form will be offered on a delayed or
continuous basis in reliance on Rule 415 under the Securities Act of 1933, other
than securities offered in connection with a dividend reinvestment plan, check
the following box.
[_]
It is proposed that this filing will become effective (check appropriate box)
[x] when declared effective pursuant to section 8(c)
If appropriate, check the following boxes:
[_] this [post-effective] amendment designates a new effective date for a
previously filed [post-effective amendment] [registration statement].
[_] this form is filed to register an additional securities for an
offering pursuant to Rule 462(b) under the Securities Act and the
Securities Act registration statement number of the earlier effective
registration statement for the same offering is ______________.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Title of Proposed Maximum Proposed Maximum
Securities Being Amount Being Offering Price Aggregate Amount of
Registered Registered Per Unit Offering Price Registration Fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock 2,843,750 $10.00 $28,437,500 $8,618
(par value $0.01 per share)
</TABLE>
______________________
1. As calculated pursuant to Rule 457(c) under the Securities Act of
1933. Based on the average high and low sale prices reported on the
New York Stock Exchange on December 16, 1996.
<PAGE>
BLUE CHIP VALUE FUND, INC.
CROSS REFERENCE SHEET
---------------------
ITEM NUMBER AND HEADING
-----------------------
PART A CAPTION IN PROSPECTUS
------ ---------------------
1. Outside Front Cover Cover Page
2. Inside Front and Outside Back Cover Page Cover Page
3. Fee Table and Synopsis Fee Table
4. Financial Highlights Financial Highlights
5. Plan of Distribution The Offer
6. Selling Shareholders *
7. Use of Proceeds Use of Proceeds
8. General Description of the Registrant The Fund
9. Management Management of the Fund
10.Capital Stock, Long-Term Debt, Capital Stock
and Other Securities
11. Defaults and Arrears on Senior Securities *
12. Legal Proceedings *
13. Table of Contents of the Statement
of Additional Information Statement of Additional
Information
PART B CAPTION IN STATEMENT OF ADDITIONAL INFORMATION
------ ----------------------------------------------
14. Cover Page Cover Page
15. Table of Contents Table of Contents
16. General Information and History *
17. Investment Objective and Policies Investment Objective and
Policies
18. Management Management
19. Control Persons and Principal Holders Control Persons and Principal
of Securities Holders of Securities
20. Investment Advisory and Other Services Investment Advisory and
Other Services
21. Brokerage Allocation and Other Brokerage Allocation
Practices and Other Practices
22. Tax Status Tax Status
23. Financial Statements Financial Statements
* Not applicable
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER ___, 1996
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the Registration Statement becomes effective. This Prospectus shall not
constitute an offer to sell or the solicitation of the offer to buy nor shall
there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
PROSPECTUS
- ----------
2,275,000 SHARES
OF
COMMON STOCK ISSUABLE UPON EXERCISE OF
RIGHTS TO SUBSCRIBE FOR SUCH SHARES OF COMMON STOCK
BLUE CHIP VALUE FUND, INC.
Blue Chip Value Fund, Inc. (the "Fund") is offering to its stockholders of
record as of the close of business on January 31, 1997 rights ("Rights"),
entitling the holders thereof to subscribe for an aggregate of 2,275,000 shares
of the Fund's Common Stock (the "Offer") at the rate of one share of Common
Stock for each five (5) Rights held.Stockholders who fully exercise their Rights
will have, subject to certain limitations and subject to allotment, an over-
subscription privilege (the "Over-Subscription Privilege"). The Rights are non-
transferable and will not be admitted for trading on the New York Stock
Exchange. See "The Offer." THE SUBSCRIPTION PRICE PER SHARE WILL BE THE LESSER
OF 95% OF THE LAST REPORTED SALE PRICE ON THE NEW YORK STOCK EXCHANGE OR 95% OF
NET ASSET VALUE ON MARCH 7, 1997 (THE "PRICING DATE") OF A SHARE OF THE FUND'S
COMMON STOCK.
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON MARCH 6, 1997 (THE
"EXPIRATION DATE"), THE 31ST DAY AFTER THE DATE OF THIS PROSPECTUS. SINCE THE
CLOSE OF THE OFFERING ON THE EXPIRATION DATE IS PRIOR TO THE PRICING DATE,
HOLDERS WHO CHOOSE TO EXERCISE THEIR RIGHTS WILL NOT KNOW THE SUBSCRIPTION PRICE
PER SHARE AT THE TIME THEY EXERCISE SUCH RIGHTS.
The Fund is a closed-end diversified management investment company. Its
investment objective is to seek a high level of total return through capital
appreciation and current income consistent with investment primarily in a
diversified portfolio of common stocks. Denver Investment Advisors LLC (the
"Advisor") serves as the investment advisor to the Fund. The Fund employs the
Advisor's Modern Value Investing(R) approach. Using this approach, the Fund will
generally be fully invested in approximately 50 common stocks believed by the
Advisor to represent the best values among those issued by (a) the 300 largest,
dividend-paying companies with headquarters in the United States as measured by
the market value of publicly-traded common stock, or (b) the 300 largest,
dividend-paying companies with headquarters in the United States as measured by
revenues. The address of the Fund is 1225 Seventeenth Street, 26th Floor,
Denver, Colorado 80202 and its telephone number is (800) 624-4190. The Fund's
Common Stock is listed on the New York Stock Exchange under the symbol "BLU."
The Fund announced the proposed Offer on _____________, 1997. The net asset
value per share of Common Stock at the close of business on _________________,
1997 was $___________, and the last reported sales price of a share of the
Fund's Common Stock on such Exchange on that date was $_____________.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==============================================================
PRICE (1) SALES LOAD PROCEEDS TO
FUND (1)(2)
<S> <C> <C> <C>
- --------------------------------------------------------------
Per Share $ None $
- --------------------------------------------------------------
$ None $
Total
==============================================================
</TABLE>
(1) Estimated based on an assumed Price per Share of 95% of the net asset value
of a share of the Fund's Common Stock on ______________, 1997. Pursuant to
the Over-Subscription Privilege, the Fund may increase the number of shares
subject to subscription by up to 25% of the shares offered hereby. If the
Fund increases the number of shares subject to subscription by 25% the
Total Price will be $________ and the Total Proceeds to the Fund will be
$________.
(2) Before deduction of expenses payable by the Fund, estimated at $100,000.
_____________________________
As a result of the terms of this offer, stockholders who do not exercise
their Rights will, upon the completion of the Offer, own a smaller proportional
interest in the Fund. In addition, because the Subscription Price per share will
be less than the current net asset value per share, the Offer will result in a
reduction of net asset value, which will dilute the holdings of stockholders who
do not exercise their Rights.
_______________________________
This Prospectus sets forth concisely the information that stockholders
should consider before exercising their Rights. Stockholders should retain this
Prospectus for future reference. Additional information about the Fund,
contained in a Statement of Additional Information, has been filed with the
Securities and Exchange Commission and is available upon request without charge
by contacting the Fund at its telephone number or address shown above. The
Statement of Additional Information bears the same date as, and is incorporated
by reference in its entirety into, this Prospectus. The table of contents of the
Statement of Additional Information appears at the end of this Prospectus.
_______________________________
________________, 1997
FEE TABLE
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load None
Dividend Reinvestment and Cash
Purchase Plan Fees None
ANNUAL EXPENSES (as a percentage of net assets)
Management Fees 0.64%
Other Expenses 0.42%
-----
Total Annual Expenses 1.06%
<CAPTION>
- ----------------------------------------------------------------------------
Example 1 year 3 years 5 years 10 years
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the
following
expenses on a
$1,000
investment,
assuming a 5%
annual return $ 11 $ 34 $ 58 $ 129
- ----------------------------------------------------------------------------
</TABLE>
The purpose of the Fee Table is to assist stockholders in understanding the
various costs and expenses that stockholders bear directly or indirectly. The
Fee Table reflects expenses paid by the Fund in 1996. For a more complete
description of these costs and expenses, see "MANAGEMENT OF THE FUND--Expenses
of the Fund."
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. THE ACTUAL EXPENSES AND RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN.
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth selected data for a share of Common Stock
outstanding throughout each period presented. The per share operating
performance and ratios for each of the five years in the period ended December
31, 1995 have been audited by Ernst & Young LLP, the Fund's independent
auditors, whose reports thereon were unqualified. The following information
should be read in conjunction with the Financial Statements and Notes thereto,
which are incorporated by reference into the Statement of Additional
Information. Further information about the performance of the Fund is
available in the semi-annual report to stockholders and the annual report to
stockholders. The Statement of Additional Information, the semi-annual report
to stockholders and the annual report to stockholders may be obtained from the
Fund free of charge by calling 1-800-624-4190.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1996 1995 1994 1993 1992 1991 1990
------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning
of Period $ 8.47 $ 6.98 $ 7.73 $ 7.63 $ 8.36 $ 6.97 $ $ 7.83
Net Proceeds from Stock
offering 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Net Investment Income 0.07 0.13 0.11 0.20 0.12 0.13 0.14
Net Gains or (Losses) on
Securities (both realized
and unrealized) 0.95 2.45 (0.11) 0.72 (0.08) 2.22 (0.25)
------------ ----------- ----------- ----------- ----------- ----------- ----------
From Investment
Operations 1.02 2.58 0.00 0.92 0.04 2.35 (0.11)
Less Distributions:
Dividends (from net
investment income) 0.03 0.13 0.11 0.20 0.12 0.13 0.14
Distributions (from
capital gains) 0.00 0.95 0.38 0.14 0.00 0.00 0.00
Distributions in Excess
of Realized Gains/1/ 0.00 0.00 0.00 0.41 0.48 0.78 0.00
Tax Return of Capital/1/ 0.00 0.01 0.26 0.07 0.17 0.05 0.61
------------ ----------- ----------- ----------- ----------- ----------- ----------
Total Distributions 0.03 1.09 0.75 0.82 0.77 0.96 0.75
----- ----- ----- ----- ----- ----- -----
Net Asset Value,
End of Period $ 9.46 $ 8.47 $ 6.98 $ 7.73 $ 7.63 $ 8.36 $ 6.97
============ =========== =========== =========== =========== =========== ==========
<CAPTION>
PERIOD FROM
FEBRUARY 4,
1987 (COM-
MENCEMENT
OF OPERA-
TIONS)
THROUGH
December 31,
------------------ ------------
1989 1988 1987
---- ---- ----
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 7.13 $ 6.68 $ 0.00
Net Proceeds from Stock offering 0.00 0.00 9.22
Net Investment Income 0.25 0.20 0.15
Net Gains or (Losses) on
Securities (both realized
and unrealized) 1.23 0.44 (2.58)
------ ------ ------
Total From Investment Operations 1.48 0.64 (2.43)
Less Distributions:
Dividends (from net investment
income) 0.30 0.19 0.11
Distributions (from capital gains) 0.00 0.00 0.00
Distributions in Excess
of Realized Gains/1/ 0.48 0.00 0.00
Tax Return of Capital/1/ 0.00 0.00 0.00
------ ------ ------
Total Distributions 0.78 0.19 0.11
----- ----- -----
Net Asset Value,
End of Period $ 7.83 $ 7.13 $ 6.68
====== ====== ======
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
Six Months Ended
June 30, 1996 1995 1994 1993 1992 1991 1990
------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Market Value,
End of Period $ 8.50 $ 7.625 $ 6.125 $ 7.875 $ 7.75 $ 7.625 $ 6.00
Total Investment Return 11.9% 41.6% (13.2)% 12.5% 12.4% 44.9% (4.0)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period $103,730,516 $92,886,640 $76,491,173 $84,168,306 $72,418,811 $78,221,238 $65,299,686
Ratio of Expenses to
Average Net Assets 1.10%/3/ 1.15% 1.22% 1.28% 1.42% 1.63% 1.96%
Ratio of Net Investment
Income to Average Net
Assets 1.49%/3/ 1.55% 1.46% 2.55% 1.57% 1.66% 1.96%
Portfolio Turnover Rate 22% 51% 63% 56% 118% 119% 104%
Average Commission Rate
Paid /4/ $ 0.05 N/A N/A N/A N/A N/A N/A
<CAPTION>
PERIOD FROM
FEBRUARY 4,
1987 (COM-
MENCEMENT
OF OPERA-
TIONS)
THROUGH
December 31,
--------------------- ------------
1989 1988 1987
---- ---- ----
<S> <C> <C> <C>
Per Share Market Value,
End of Period $ 7.00 $ 6.00 $ 5.50
Total Investment Return 30.4% 12.6% (44.2)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period $73,316,564 $66,786,925 $62,516,023
Ratio of Expenses to
Average Net Assets 1.98% 2.22% 2.12%/2/
Ratio of Net Investment
Income to Average Net
Assets 3.25% 2.82% 2.46%/2/
Portfolio Turnover Rate 165% 135% 97%
Average Commission Rate
Paid N/A N/A N/A
</TABLE>
______________________
/1/ From 1989 through 1993 the Fund distributed to stockholders quarterly an
amount equal to 2.5% (10% on an annual basis) of the Fund's net asset value per
share, without regard to net investment income and net capital gains. These
distributions were previously reported as returns of capital in the Fund's
annual reports to stockholders. Under new accounting guidelines, the
distributions have been reclassified into two categories: (i) distributions in
excess of realized gains, which are distributions attributable to realized gains
in the current year offset by loss carryovers from prior years--which are
taxable to the recipient as ordinary income, and (ii) tax return of capital,
which are distributions that are in excess of current and accumulated earnings
and profits--which are not taxable to stockholders.
/2/ Computed for the period, from February 4, 1987 (commencement of operations)
through December 31, 1987, annualized.
/3/ Annualized.
/4/ Required for fiscal years beginning on or after September 1, 1995.
-3-
<PAGE>
SENIOR SECURITIES
At the time of its organization and public offering in 1987, the Fund
borrowed a total of $7,375,500 in the form of 8-1/2% Senior Installment Notes
(the "Notes"). Pursuant to the Notes, the Fund made monthly payments of
principal and interest, the last of which was paid in May 1993. The Fund has had
no Senior Securities outstanding since May 1993. The following table sets forth
the principal amount of the Notes outstanding at the end of each year, together
with the asset coverage for each $1,000 of indebtedness.
<TABLE>
<CAPTION>
ASSET COVERAGE PER
DECEMBER TOTAL AMOUNT $1,000 OF
31 OUTSTANDING INDEBTEDNESS
- ---------- ------------------
<S> <C> <C>
1995 $ 0 $ N/A
1994 0 N/A
1993 0 N/A
1992 643,172 113,596
1991 2,097,368 38,295
1990 3,433,466 20,019
1989 4,661,055 16,730
1988 5,788,949 12,537
1987 6,742,194 10,272
</TABLE>
THE OFFER
TERMS OF THE OFFER
The Fund hereby offers to the holders of its Common Stock of record as of
the close of business on January 31, 1997 (the "Record Date") the right to
subscribe for an aggregate of 2,275,000 shares of Common Stock (the "Shares") of
the Fund. Each such stockholder is being issued one (1) Right for each share of
Common Stock owned on the Record Date. The Rights entitle a stockholder to
acquire in the Primary Subscription at the Subscription Price one (1) Share for
each five (5) Rights held. Rights may be exercised at any time during the
Subscription Period, which commences on the date of this Prospectus and ends as
of 5:00 p.m. New York time, on March 6, 1997 (the "Expiration Date"). A
stockholder's right to acquire one (1) Share for each five (5) Rights held is
hereinafter referred to as the "Primary Subscription."
In addition, any stockholder who fully exercises all Rights issued to him
is entitled to subscribe for Shares which were not otherwise subscribed for in
the Primary Subscription. For purposes of determining the maximum number of
Shares a holder may acquire pursuant
-4-
<PAGE>
to the Offer, broker-dealers whose Shares are held of record on the Record Date
by Cede & Co. or by any other depository or nominee will be deemed to be the
holder of the Rights that are issued to Cede & Co. or such other depository or
nominee. Shares acquired pursuant to the Over-Subscription Privilege are subject
to allotment or increase, which is more fully discussed below under "Over-
Subscription Privilege."
The Rights are non-transferable. Therefore, only the underlying Shares, and
not the Rights, will be admitted for trading on the New York Stock Exchange.
Since fractional shares will not be issued, stockholders who receive, or who are
left with, fewer than five (5) Rights will be unable to exercise such Rights and
will not be entitled to receive any cash in lieu of fractional shares.
IMPORTANT DATES TO REMEMBER
<TABLE>
<CAPTION>
EVENT DATE
----- ----
<S> <C>
Record date January 31, 1997
Subscription period February 3, 1997 through March 6, 1997
Expiration of the offer March 6, 1997
Pricing Date March 7, 1997
Confirmation to participants March 14, 1997
Final payment for shares March 28, 1997
</TABLE>
PURPOSES OF THE OFFER
The Board of Directors of the Fund has determined that it would be in the
best interests of the Fund and its stockholders to increase the assets of the
Fund available for investment. In addition, the Offer seeks to reward the long-
term stockholder by giving existing stockholders the right to purchase
additional Shares at a price below market value and net asset value without
brokerage commissions. Increasing the size of the Fund also might result in
lowering the Fund's expenses as a percentage of average net assets.
The purpose of setting the determination of the Subscription Price
subsequent to the Expiration Date is to insure that the Offer will attract the
maximum participation of stockholders with the minimum dilution to non-
participating stockholders.
The Advisor may benefit from the Offer because its fee is based on the net
assets of the Fund. It is not possible to state precisely the amount of
additional compensation the Advisor might receive as a result of the Offer
because it is not known how many Shares will be subscribed for and because the
proceeds of the Offer will be invested in additional portfolio securities which
will presumably fluctuate in value. One of the Fund's directors who voted to
authorize the Offer is affiliated with the Advisor and, therefore, could benefit
indirectly from the offer. The other four directors are not "interested persons"
of the Fund within the meaning of the Investment Company Act of 1940 (the "1940
Act").
-5-
<PAGE>
The Fund may, in the future and at its discretion, from time to time,
choose to make additional rights offerings, for a number of shares and on terms
which may or may not be similar to this Offer.
OVER-SUBSCRIPTION PRIVILEGE
If some stockholders do not exercise all of their Rights, the remaining
unsubscribed Shares will be offered, by means of the Over-Subscription
Privilege, to holders of Rights who wish to acquire more than the number to
which their Rights entitle them. Holders of Rights who exercise their Rights
will be asked to indicate on the Exercise Form how many Shares they are willing
to acquire pursuant to this Over-Subscription Privilege. If there remain
sufficient Shares, all over-subscriptions will be honored in full. If there are
not sufficient Shares to honor all over-subscriptions, the Fund may, at its
discretion, issue up to an additional 25% of the Shares available pursuant to
the Offer in order to honor such over-subscriptions. To the extent the Fund
determines not to issue additional Shares to honor all over-subscriptions the
available Shares will be allocated among those who oversubscribe based solely on
the number of shares of Common Stock held of record on the Record Date. The
percentage of remaining Shares each oversubscribing holder may acquire may be
rounded up or down to result in delivery of whole Shares. The allocation process
may involve a series of allocations in order to assure that the total number of
Shares available for oversubscriptions are distributed on a pro-rata basis.
The Fund will not offer or sell any shares which are not subscribed for
pursuant to the Primary Subscription or the Over-Subscription Privilege.
THE SUBSCRIPTION PRICE
The Subscription Price for the Shares to be issued on the exercise of the
Rights will be the lesser of 95% of the last reported sale price on the New York
Stock Exchange or 95% of net asset value on March 7, 1997 (the "Pricing Date")
of a share of the Fund's Common Stock.
The Fund announced the proposed Offer on ______________, 1997. The net
asset value per share of the Fund's Common Stock at the close of business on
_____________, 1997 was $ _______________, and the last reported sale price of a
share of the Fund's Common Stock on such Exchange on that date was $__________.
As an example, the Subscription Price would have been $____ had the Subscription
Price been determined (without adjustments for any distributions) on that date.
The actual Subscription Price will not be determined until the Pricing Date.
EXPIRATION OF THE OFFER
The Offer will expire at 5:00 p.m., New York time, on March 6, 1997, the
31st day after the date of this Prospectus (the "Expiration Date"). Rights will
expire on the Expiration Date and thereafter may not be exercised. Inasmuch as
the close of the offering on the Expiration Date is prior to the time of pricing
the Offering, stockholders who decide
-6-
<PAGE>
to acquire Shares in the Primary Subscription or pursuant to the Over-
Subscription Privilege will not know the Subscription Price per share when they
make their decisions.
SUBSCRIPTION AGENT
The Subscription Agent for the Offer is Chase Mellon Shareholder Services,
L.L.C., 85 Challenger Road, Overpeck Centre, Ridgefield Park, NJ 07660, which
will receive a fee in the amount of $35,000 (estimated) and reimbursement for
all out-of-pocket expenses related to the Offer. Stockholders who acquire shares
pursuant to the Offer will not receive interest on funds held by the
Subscription Agent. The Subscription Agent will hold such funds in a segregated,
depository account, and will pay interest thereon to the Fund. The Subscription
Agent is also the Fund's Transfer Agent. Stockholder inquiries relating to the
Offer should be directed to the Fund by calling 1-800-624-4190.
METHOD OF EXERCISE OF RIGHTS
Rights may be exercised by filling in and signing the enclosed Exercise
Form and mailing it in the envelope provided, or delivering the completed and
signed Exercise Form to the Subscription Agent, together with payment for the
shares as described below under "Payment for Shares." Fractional shares will not
be issued, and stockholders who receive, or who are left with, fewer than five
(5) Rights will not be able to exercise such Rights. Exercise Forms must be
received by the Subscription Agent prior to 5:00 p.m., New York Time, on the
Expiration Date (unless payment is effected by means of a notice of guaranteed
delivery (see "Payment for Shares") at the offices of the Subscription Agent.
Rights may also be exercised through a holder's broker.
PAYMENT FOR SHARES
Stockholders who acquire Shares in the Primary Subscription or pursuant to
the Over-Subscription Privilege may choose between the following methods of
payment:
(1) If, prior to 5:00 p.m., New York time, on the Expiration Date, the
Subscription Agent shall have received a notice of guaranteed delivery by
telegram or otherwise, from a bank or trust company or a New York Stock
Exchange member firm, together with payment of the full Subscription Price
for the Shares subscribed for in the Primary Subscription and any
additional Shares subscribed for pursuant to the Over-Subscription
Privilege, guaranteeing delivery of a properly completed and executed
Exercise Form, the subscription will be accepted by the Subscription Agent.
The Subscription Agent will not honor a notice of guaranteed delivery if a
properly completed and executed Exercise Form is not received by the
Subscription Agent prior to 5:00 p.m., New York time, on the fifth (5th)
business day after the Expiration Date .
-7-
<PAGE>
(2) Alternatively, a stockholder can, together with the Exercise Form,
send payment for the Shares acquired in the Primary Subscription and any
additional Shares subscribed for pursuant to the Over-Subscription
Privilege, to the Subscription Agent based on an assumed purchase price of
$_____ per Share. To be accepted, such payment, together with the Exercise
Form, must be received by the Subscription Agent prior to 5:00 p.m., New
York time, on the Expiration Date.
A PAYMENT BY CHECK, PURSUANT TO THE SECOND METHOD DESCRIBED ABOVE, MUST
ACCOMPANY ANY EXERCISE FORM FOR SUCH EXERCISE FORM TO BE ACCEPTED.
Within three (3) business days following the Pricing Date, a confirmation
will be sent by the Subscription Agent to each stockholder (or, if the Fund's
shares on the Record Date are held by Cede & Co. or any other depository or
nominee, to Cede & Co. or such other depository or nominee). The date of the
confirmation is referred to as the "Confirmation Date." The confirmation will
show (i) the number of Shares acquired pursuant to the Primary Subscription;
(ii) the number of Shares, if any, acquired pursuant to the Over-Subscription
Privilege; (iii) the per Share and total purchase price for the Shares; and (iv)
any additional amount payable by such stockholder to the Fund or any excess to
be refunded by the Fund to such stockholder, in each case based on the
Subscription Price as determined on the Pricing Date. In the case of any such
stockholder who exercises his right to acquire Shares pursuant to the Over-
Subscription Privilege, any such excess payment which would otherwise be
refunded to him will be applied by the Fund toward payment for Shares acquired
pursuant to exercise of the Over-Subscription Privilege. Any additional payment
required from a stockholder must be received by the Subscription Agent prior to
5:00 p.m., New York Time, on the tenth (10th) business day after the
Confirmation Date, and any excess payment to be refunded by the Fund to such
stockholder will be mailed by the Subscription Agent within ten (10) business
days after the Confirmation Date. All payments by a stockholder must be made in
United States dollars by money order or check drawn on a bank located in the
United States of America and payable to Blue Chip Value Fund, Inc.
Whichever of the above two methods is used, issuance and delivery of
certificates for the Shares subscribed for are subject to collection of checks
and actual payment pursuant to any notice of guaranteed delivery.
If a stockholder who acquires Shares pursuant to the Primary Subscription
or Over-Subscription Privilege does not make payment of any additional amounts
due, the Fund reserves the right to (i) find other purchasers for such
subscribed and unpaid shares; (ii) apply any payment actually received by it
toward the purchase of the largest number of whole Shares which could be
acquired by such stockholder with such payment upon exercise of the Primary
Subscription and/or Over-Subscription Privilege; and/or (iii) exercise the right
to set-off against payments actually received by it with respect to such
subscribed Shares.
-8-
<PAGE>
POSSIBLE SUSPENSION OR WITHDRAWAL OF THE OFFER
The Fund has, as required by the Securities and Exchange Commission's
registration form, undertaken to suspend the Offer until it amends this
Prospectus if, subsequent to ___________, 1997, the effective date of the Fund's
Registration Statement, the Fund's net asset value declines more than 10% from
its net asset value as of _______________, 1997. Accordingly, the Fund will
notify stockholders of any such decline and thereby permit them to cancel their
exercise of Rights.
The Fund also reserves the right to withdraw the Offer if prior to the
Expiration Date the closing sales price for shares of the Fund's Common Stock on
the New York Stock Exchange represents less than 90% of the most recently
published net asset value per share of the Fund, i.e., if the discount exceeds
----
10% of net asset value per share.
PURCHASE AND SALE OF RIGHTS
The Rights are non-transferable and, therefore, may not be purchased or
sold. The Rights will not be admitted to trading on the New York Stock
Exchange. However, the Shares to be issued pursuant to the Rights will be
listed and admitted to trading on the New York Stock Exchange.
DELIVERY OF STOCK CERTIFICATES
Stock certificates for all Shares acquired pursuant to the Primary
Subscription and the Over-Subscription Privilege will be mailed within ten (15)
business days after the Confirmation Date and after full payment of the Shares
subscribed for has cleared.
TAX CONSEQUENCES
For Federal income tax purposes, neither the receipt nor the exercise of
the Rights will result in taxable income to holders of Common Stock, and no loss
will be realized if the Rights expire without being exercised.
A stockholder's holding period for a Share acquired upon exercise of Right
begins with the date of exercise. In the absence of a special election by the
stockholder, the stockholder's basis for determining gain or loss upon the sale
of a Share acquired upon exercise of a Right will be equal to the per Share
Subscription price. A stockholder's gain or loss recognized upon a sale of that
Share will be capital gain or loss if the Share was held as a capital asset at
the time of sale and will be long-term capital gain or loss if it was held, at
the time of sale, for more than one (1) year.
The foregoing does not cover the state or local tax consequences of
receiving or exercising a Right, as to which stockholders should consult their
own tax advisers.
-9-
<PAGE>
SPECIAL CONSIDERATION
As a result of the terms of the Offer, stockholders who do not exercise
their Rights will, at the completion of the Offer, own a smaller proportional
interest in the Fund. In addition, because the Subscription Price for each Share
will be less than the then current net asset value per share of the Fund's
Common Stock, the Offer will result in a reduction of net asset value which will
dilute the holdings of stockholders who do not exercise their Rights. For
example, assuming that all Shares offered hereby are purchased in the Offer and
the Fund increases the number of Shares subject to subscription by 25% in order
to satisfy the over-subscriptions, and that the Subscription Price is 95% of the
Fund's net asset value of $_________ per share on________, 1997, the Fund's net
asset value per share would be reduced by approximately $________ per share as
of that date, and assuming that only one-half of the Shares offered hereby are
purchased in the Offer, the Fund's net asset value per share would be reduced by
approximately $________ per share as of that date.
USE OF PROCEEDS
Assuming all Shares offered hereby are sold at the estimated Subscription
Price of $_____ per Share, the net proceeds of the offer are estimated to be
$______, after deducting expenses payable by the Fund estimated at approximately
$100,000. If the Fund in its sole discretion increases the number of Shares
subject to the Offer by 25% in order to satisfy over-subscriptions, the
additional net proceeds will be approximately $____________. It is anticipated
that investment of such proceeds in accordance with the Fund's investment
objective and policies will occur promptly, and in any event within ten business
days, after they are available to the Fund.
THE FUND
Blue Chip Value Fund, Inc. is a Maryland corporation that was organized on
February 4, 1987. The Fund is a closed-end diversified management investment
company registered under the 1940 Act.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek a high level of total return
through capital appreciation and current income consistent with investment
primarily in a diversified portfolio of common stocks. There can be no assurance
that the Fund will achieve its investment objective.
The Fund has a fundamental policy that during normal conditions it will at
all times have at least 75% of its total assets invested in common stocks
selected from among those issued by (a) the 300 largest, dividend-paying
companies with headquarters in the United States as measured by the market value
of publicly-traded common stock, or (b) the 300 largest, dividend-paying
companies with headquarters in the United States as measured by revenues. The
Fund's fundamental policies, like its investment objective, cannot be changed
without the approval of the holders of the lesser of (i) 67% or more of the
shares at a
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<PAGE>
meeting, if the holders of a majority of the shares are represented at the
meeting, or (ii) more than 50% of the outstanding shares.
Pursuant to its nonfundamental policies, the Fund remains fully
invested during normal market conditions in approximately 50 common stocks
believed by the Advisor to represent the best values among the companies
described above. The Fund will at all times, during normal market
conditions, have at least 90% of its total assets invested in accordance
with the Modern Value Investing(R) approach, applied consistently with the
Fund's fundamental policies. The Modern Value Investing(R) approach
consists of a multi-factor model that considers discounted dividends,
earnings momentum, price momentum and other factors in order to select
approximately 50 stocks. The discounted dividends factor represents the
risk-adjusted expected return of each stock. The earnings momentum factor
includes the rate of change in consensus earnings estimates for these
stocks and deviations in reported earnings from such estimates. Price
momentum measures the risk-adjusted relative performance of the market
value of each stock. The Advisor applies its multi-factor valuation model
at least monthly and more frequently if close monitoring of price
movements, changes in earnings estimates, or other market or portfolio
developments suggest that a stock in the portfolio may no longer meet the
Advisor's investment criteria.
For temporary defensive purposes, the Fund may retain assets in cash
and may invest without limit in short-term debt securities and instruments,
which may include obligations of the United States Government, its agencies
or instrumentalities; commercial paper having, at the time of purchase, a
rating within the highest rating category by an unaffiliated nationally
recognized statistical rating organization (a "NRSRO"), or if not rated,
issued by companies having an outstanding unsecured debt issue currently
rated within one of the two highest rating categories by a NRSRO;
certificates of deposit or bankers' acceptances of domestic branches of
U.S. Banks with total assets at the time of purchase of $1 billion or more;
repurchase agreements with respect to such obligations; or securities
issued by other investment companies which invest in high quality, short-
term debt securities and which seek to maintain a $1.00 net asset value per
share. The Fund may also acquire short-term debt securities and
instruments in the course of managing its daily cash position. During
normal market conditions, however, the Fund will not invest more than 10%
of its total assets in such securities. If securities issued by other
investment companies are acquired, it will be done within the limits
prescribed by the 1940 Act. As a shareholder of another investment
company, the Fund would bear, along with all other shareholders, its pro
rata portion of the other investment company's expenses.
The policies set forth below are fundamental policies of the Fund.
The Fund may not:
1. Purchase securities on margin.
2. Sell securities short.
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<PAGE>
3. Underwrite the securities of other issuers or invest in
restricted securities.
4. Invest more than 20% of its total assets in any one industry.
5. Purchase or sell real estate or real estate mortgage loans, or
invest in the securities of real estate companies unless such securities
are publicly traded.
6. Purchase or sell commodities, commodity contracts or futures.
7. Lend its portfolio securities in excess of 25% of its total
assets, taken at market value.
8. Make loans to other persons (except as provided in 7 above),
provided that for the purposes of this restriction the acquisition of
short-term debt securities and instruments and repurchase agreements in
which the Fund may invest shall not be deemed to be the making of a loan.
9. Invest in companies for the purpose of exercising control or
management.
10. Invest in the securities of any one issuer (other than the United
States or an agency or instrumentality of the United States) if, at the
time of acquisition, the Fund would own more than 10% of the voting
securities of such issuer or, as to 75% of the Fund's total assets, more
than 5% of such assets would be invested in the securities of such issuer.
11. Purchase or sell any warrants, rights, options or indices.
12. Invest more than 5% of its total assets in repurchase agreements.
13. Invest more than 5% of its total assets, taken at market value,
in securities of issuers (other than the United States or an agency or
instrumentality of the United States) having a record, together with
predecessors, of less than three years of continuous operation.
14. Invest in securities of foreign issuers whose securities are not
traded on the New York or American Stock Exchanges or the NASDAQ-National
Market Systems.
15. Issue senior securities or borrow money, except for (i) temporary
bank borrowings (not in excess of 5% of the value of its total assets) for
emergency or extraordinary purposes, (ii) such short-term credits (not in
excess of 5% of the value of its total assets) as are necessary for the
clearance of securities transactions, (iii) borrowings from banks and other
financial institutions, in an amount not exceeding 10% of its total assets
and on an unsecured basis, to finance the repurchase of its shares, and
(iv) the borrowing of an amount approximately equal to the underwriting
discount and organizational and offering expenses with respect to its
initial public offering.
-12-
<PAGE>
16. Purchase portfolio securities from or sell such securities
directly to any of its officers, directors, employees or investment advisor
as principal for their own account.
In its last fiscal year, the Fund did not invest in repurchase
agreements referred to in restriction 12 above, or acquire securities
described in restriction 13 above, and it has no plans to invest in such
agreements or acquire such securities in the current year.
If a percentage restriction is adhered to at the time of investment or
borrowing, a later increase or decrease in percentage resulting from a
change in values of portfolio securities or amount of total assets will not
be considered a violation of any of the foregoing restrictions.
INVESTMENT AND MARKET RISKS
As an investment company that holds common stocks, the Fund's
portfolio is subject to the possibility that common stock prices will
decline over short or even extended periods. The Fund will remain fully
invested during periods when stock prices generally rise and also during
periods when they generally decline. Risks are inherent in equity
investing, and investors should be able to tolerate significant
fluctuations in the value of their investments. The Fund is intended to be
a long-term investment vehicle and is not designed to provide investors
with a means of speculating on short-term stock market movements.
Investors should not consider the Fund a complete investment program. In
addition, shares of closed-end investment companies such as the Fund are
not redeemable and frequently trade at a discount from the Fund's per-share
net asset value.
SHARE PRICE DATA
The Fund's Common Stock is publicly held and is listed and traded on
the New York Stock Exchange. The following table sets forth for the
periods indicated the high and low closing sales prices for the shares on
the New York Stock Exchange, the net asset values per share that
immediately preceded the high and low closing sales prices, and the
discount or premium that each sales price represented as a percentage of
the preceding net asset value:
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<PAGE>
<TABLE>
<CAPTION>
PRECEDING NET
HIGH SALES LOW SALES ASSET VALUES DISCOUNT (-) OR
QUARTER OR OTHER PRICE PRICE PER SHARE/2/ PREMIUM (+)/3/
------------ ----------------
PERIOD ENDED PER SHARE/1/ PER SHARE/1/ HIGH LOW HIGH LOW
- ------------------------- ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C>
March 31, 1994 8.375 7.625 7.76 7.70 + 7.93% -0.97%
June 30, 1994 7.75 6.625 7.39 7.25 + 4.87% -8.62%
September 30, 1994 7.125 6.75 7.78 7.63 -10.71% -11.53%
December 31, 1994 7.00 6.125 7.61 7.00 -8.02% -12.50%
March 31, 1995 6.75 6.125 7.30 7.07 -7.53% -13.37%
June 30, 1995 7.25 6.625 8.33 7.73 +12.97% -14.29%
September 30, 1995 7.875 7.25 8.82 8.52 -8.42% -14.91%
December 31, 1995 8.625 7.625 9.43 9.38 -8.54% -18.71%
March 31, 1996 8.875 7.75 9.19 8.41 -8.87% -7.85%
June 30, 1996 8.50 8.125 9.41 9.07 -9.67% -10.42%
September 30, 1996 9.25 8.25 9.54 9.41 -3.04% -12.33%
December 31, 1996 _____ _____ ____ ____ _____% ______%
</TABLE>
________________________
1. As reported on the New York Stock Exchange. During periods in which
the Fund's shares traded at the high or low price for more than one
day, the information is provided with respect to the trading day on
which the discount or premium was greatest.
2. The net asset value per share calculated by the Fund as of the Friday
preceding the date of each high sales price in the first column and
each low sales price in the second column. Thus, this column does not
necessarily show the highest or the lowest net asset value per share
during the period.
3. This column shows the discount or premium that the high and low sales
prices in the first two columns bore to the respective, preceding net
asset values in the third column. It does not necessarily show the
highest or lowest discount or premium during the period.
The Fund was organized in April 1987. Its Common Stock generally
traded at a discount from net asset value per share until the third quarter
of 1992. From the third quarter of 1992 through the first quarter of 1994
the Fund's Common Stock traded at a slight premium above net asset value
per share. Since April of 1994 the Fund's Common Stock has traded at a
discount from net asset value per share.
Beginning in 1989 and until April 1994 the Fund attempted to reduce
the discount by distributing to stockholders quarterly an amount equal to
2.5% (10% on an annual basis) of the Fund's net asset value per share,
without regard to net investment income and net capital gains. The Fund
believes that this policy tended to reduce the discount. In fact, from the
third quarter of 1992 through the first quarter of 1994, the Fund's Common
Stock traded at a slight premium to net asset value. In order to comply
with a regulation of the Securities and Exchange Commission, in April 1994
the Fund modified its distribution policy from four quarterly distributions
of 2.5% of net asset value to three quarterly distributions of net
investment income, followed by a fourth distribution of an amount equal to
the greater of 10% of net asset value less the prior three distributions,
or the sum of the Fund's net investment income and net capital gains. The
result was an aggregate annual distribution of substantially the same
amount, but it was paid in non-level quarterly distributions. Although the
Fund does not know what actual effect the distribution policy has on the
market price, after the Fund modified its distribution policy in April of
1994, its Common Stock traded at a discount from its net asset value per
share. The Fund has recently received an exemptive order from the
Securities and Exchange Commission allowing the Fund to make up to four
distributions of long-term capital gains in a taxable year as long as it
maintains a policy of
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<PAGE>
distributing a fixed percentage of net asset value quarterly. This
exemptive order allows the Fund to return to its previous distribution
policy. The Fund recently has announced a return to the Fund's prior policy
of distributing 2.5% of the net asset value quarterly to its stockholders.
The first distribution under this policy is expected to be in April of
1997.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The Board of Directors of the Fund is responsible for the overall
management and operations of the Fund. The Statement of Additional
Information contains information concerning the directors.
INVESTMENT ADVISOR
Denver Investment Advisors LLC serves as the investment advisor to the
Fund. The Advisor's address is 1225 17th Street, 26th Floor, Denver,
Colorado 80202. The Advisor is a limited liability company owned and
operated by the principal officers and employees of Denver Investment
Advisors, Inc., which served as the Fund's investment adviser from its
inception until March 31, 1995. As of June 30, 1996, the Advisor had
approximately $10.2 billion under management (including approximately $984
million for 9 investment company portfolios).
Subject to the general supervision of the Board of Directors, the
Advisor manages the Fund's portfolio, makes decisions with respect to and
places orders for all purchases and sales of the Fund's securities, and
maintains records relating to such purchases and sales. The Fund pays the
Advisor a monthly fee at the annual rate of .65% of the Fund's average
weekly net assets up to $100,000,000 and .50% of the Fund's average weekly
net assets over $100,000,000.
PORTFOLIO MANAGER
Varilyn K. Schock, C.F.A., has been primarily responsible for the day-
to-day management of the Fund's portfolio since October, 1991. She has
been a Vice-President of the Fund and a Vice-President and Member of the
Advisor since 1995, and prior thereto was a Vice President and Director of
Quantitative Strategies of Denver Investment Advisors, Inc. since 1991.
ADMINISTRATOR
American Data Services, Inc. (the "Administrator") furnishes the Fund
with clerical, accounting, bookkeeping and related services, and computes
the net asset value and net income of the Fund. The Administrator prepares
annual and quarterly returns to the
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<PAGE>
Securities and Exchange Commission, prepares federal and state tax returns,
maintains the Fund's financial accounts and records (except stockholders'
records) and generally assists in all aspects of the Fund's operations. The
Fund pays the Administrator a monthly fee at an annual rate of .10% of the
Fund's average weekly net assets up to $75,000,000, .05% of the Fund's
average weekly net assets between $75,000,000 and $125,000,000, and .03% of
the Fund's average weekly net assets in excess of $125,000,000, with a
$7,463 per month minimum.
CUSTODIAN AND TRANSFER AGENT
Wells Fargo Bank, N.A., 633 17th Street, Denver, Colorado 80202,
serves as the Fund's custodian.
Chase Mellon Shareholder Services, L.L.C., 85 Challenger Road,
Overpeck Centre, Ridgefield Park, NJ 07660, serves as the Fund's Transfer
Agent, Dividend Reinvestment and Cash Purchase Plan Agent, and Subscription
Agent for the Offer.
EXPENSES OF THE FUND
The Fund pays all of its expenses other than those expressly assumed
by the Advisor. The expenses payable by the Fund include: expenses of the
Offer, advisory fees payable to the Advisor and administrative fees payable
to the Administrator; audits by independent public accountants; transfer
agent and registrar, custodian and portfolio record keeping services;
dividend disbursing agent and stockholder record keeping services; taxes
and the preparation of the Fund's tax returns; brokerage fees and
commissions; interest; cost of director and stockholder meetings; printing
and mailing reports to stockholders; fees for filing reports with
regulatory bodies and the maintenance of the Fund's existence; membership
dues for investment company industry trade associations; legal fees; stock
exchange listing fees and expenses; fees to federal and state authorities
for the registration of shares; fees and expenses of directors who are not
officers, employees or members of the Advisor; insurance and fidelity bond
premiums; and any extraordinary expenses.
DISTRIBUTIONS AND TAXES
From 1989 until April 1994 the Fund distributed to stockholders
quarterly an amount equal to 2.5% (10% on an annual basis) of the Fund's
net asset value per share, without regard to net investment income and net
capital gains. Since April 1994 quarterly distributions have been limited
to net investment income, and once a year the Fund supplemented the
quarterly distributions with an annual distribution that brought
distributions for the year to the greater of 10% of the Fund's net asset
value per share, or the sum of its net investment income and net capital
gains. The Fund expects that this policy will be modified beginning in
1997, so that quarterly distributions will again equal 2.5% (10% on an
annual basis) of the Fund's net asset value per share. See "THE FUND--Share
Price Data." To the extent that the Fund's distributions exceed its net
investment income and net capital gains, the Fund liquidates a
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<PAGE>
portion of its portfolio to fund these distributions, which represent a
return of capital to stockholders and therefore may be deemed to be a
reduction of their principal.
The Fund qualified during its last taxable year as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended
(the "Code") and intends to continue to so qualify. This qualification
relieves the Fund of liability for federal income taxes to the extent the
Fund's earnings are distributed in accordance with the Code. Qualification
as a regulated investment company under the Code for a taxable year
requires, among other things, that the Fund distribute to its stockholders
an amount equal to at least 90% of its investment company taxable income
for such taxable year. In general, the Fund's investment company taxable
income will be its taxable income, including dividends, interest and the
excess, if any, of net short-term capital gain over net long-term capital
loss, subject to certain adjustments, and excluding the excess, if any, of
net long-term capital gain for the taxable year over net short-term capital
loss. The dividends received deduction for corporations which own shares
in the Fund will apply to ordinary income distributions from the Fund to
the extent of such stockholders' ratable share of the total qualifying
dividends received by the Fund from domestic corporations for the taxable
year. It is not expected that the alternative minimum tax will apply to
stockholder dividends and distributions.
Distributions by the Fund are taxable to the stockholders to the
extent paid out of the Fund's current or accumulated earnings and profits,
regardless whether such distributions are received in cash or reinvested in
additional shares of Common Stock. Such distributions constitute ordinary
income to the stockholders except to the extent they are designated as
capital gain dividends, as discussed below. Any distributions by the Fund
in excess of its current and accumulated earnings and profits constitute a
nontaxable return of capital to stockholders to the extent of each
stockholder's tax basis in his or her shares (causing a reduction of such
basis), and thereafter, to the extent of any excess over such basis,
capital gain.
The Fund intends to designate as capital gain dividends any
distributions by the Fund of the excess of net long-term capital gain over
net short-term capital loss. Such capital gain dividends will be taxable
to stockholders as long-term capital gain, regardless of how long the
stockholder has held the Shares and whether such distributions are received
in cash or reinvested in additional shares of Common Stock. Such
distributions are not eligible for the dividends received deduction for
corporations.
To the extent that the Fund distributes amounts in a given year that
exceed the Fund's investment company taxable income and excess of net long-
term capital gain over net short-term capital loss (after taking into
account capital loss carryovers), such excess distributions may nonetheless
cause stockholders to recognize taxable income under the federal income tax
principles described above.
Dividends declared in October, November or December of any year
payable to stockholders of record as of a specified date in such months
will be deemed to have been
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<PAGE>
received by stockholders and paid by the Fund on December 31 of such year
if such dividends are actually paid during January of the following year.
Prior to purchasing shares, the impact of distributions which are
expected to be declared or have been declared, but have not been paid,
should be carefully considered. Any such distributions although in effect
a return of capital, are subject to tax as discussed above.
A taxable gain or loss may be recognized by a stockholder upon his or
her sale of shares of the Fund depending upon the tax basis and their price
at the time of sale. Generally, a stockholder may include brokerage costs
incurred upon the purchase and/or sale of Fund shares in his or her tax
basis for such shares for the purpose of determining gain or loss on a sale
of such shares.
Stockholders will be advised at least annually as to the federal
income tax consequences of distributions made each year.
The foregoing discussion summarizes some of the important federal tax
considerations generally affecting the Fund and its stockholders who are
U.S. citizens or residents or domestic corporations, and is not intended as
a substitute for careful tax planning. Accordingly, investors in the Fund
should consult their tax advisors with specific reference to their own tax
situations. Stockholders are also advised to consult their tax advisors
concerning state and local taxes, which may differ from the federal income
taxes described above.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
All distributions to stockholders whose shares are registered in their
own names may be reinvested pursuant to the Dividend Reinvestment and Cash
Purchase Plan (the "Plan") in additional shares of the Fund. Stockholders
who choose to hold their shares in the name of a broker or nominee should
contact such broker or nominee to determine whether or how they may
participate in the Plan. There is no service charge for participation in
the Plan.
A stockholder may elect to withdraw from the Plan at any time and
thereby elect to receive future dividends in cash in lieu of shares of the
Fund. There will be no penalty for withdrawal from the Plan and
stockholders who have previously withdrawn from the Plan may rejoin it at
any time. Changes in elections must be in writing and should include the
stockholder's name and address as they appear on the share certificate.
They should be sent to the Transfer Agent (referred to in this Section as
the "Agent"). An election to withdraw from the Plan will, until such
election is changed, be deemed to be an election by a stockholder to take
all subsequent distributions in cash. Elections will only be effective for
subsequent distributions with a record date of at least fifteen (15) days
after such elections are received by the Agent.
-18-
<PAGE>
Funds credited to a participant's account will be used to purchase
shares of the Fund's Common Stock (the "Purchase"). The Agent will
attempt, commencing on the first trading day and ending on the tenth
trading day following the record date, to acquire shares in the open market
at a price, plus commission, which is less than the net asset value per
share most recently published by the Fund prior to any purchase (the "Net
Asset Value"). If and to the extent that the Agent is unable to acquire
sufficient shares of the Fund's Common Stock at a price plus commission
less than the Net Asset Value, the Fund will issue to the Agent shares of
the Fund's Common Stock, valued at the Net Asset Value, in the aggregate
amount of the remaining value of the distribution.
The reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends or distributions. See "DISTRIBUTIONS AND TAXES."
Stockholders participating in the Plan may receive benefits not
available to stockholders not participating in the Plan. If the market
price plus commissions of the Fund's shares is above the net asset value,
participants in the Plan will receive shares of the Fund at net asset
value, which is less than they could otherwise purchase them in the open
market and will have shares with a market value greater than the value of
any cash distribution they would have received. There can be no assurance
that the market price of the Fund's shares of common stock will exceed
their net asset value.
The Fund will increase the price at which its shares may be issued to
the Plan if the net asset value of the shares is less than 95% of the fair
market value of such shares on the payment date of any distribution of net
investment income or net capital gain, unless the Fund receives a legal
opinion from independent counsel that the issuance of shares at net asset
value under these circumstances will not have a material effect upon the
federal income tax liability of the Fund.
A participant may from time to time make voluntary cash contributions
to his or her account by sending to the Agent a check of money order
payable to the Agent in an amount not less than $50 and not in excess of
$10,000 per month to acquire additional shares of the Fund. In the case of
any voluntary cash contribution which exceeds $10,000 per month, the excess
will be returned to the participant by the Agent. All cash contributions to
a participant's account made pursuant to this paragraph will be invested in
shares of the Fund's Common Stock purchased in the open market
(irrespective of net asset value). The Agent will invest all voluntary cash
contributions on or about the last business day of the month, provided it
receives the contributions at least two business days before the last
business day of the month (the "Cut-off date"). Because interest is not
paid on voluntary cash contributions, participants should make such
contributions shortly before the Cut-off Date, allowing sufficient time for
mail delivery. Voluntary cash contributions received after the Cut-off Date
will be used to acquire additional shares of the Fund on or about the last
business day of the following month. Following any monthly investment of
voluntary cash contributions, the Agent will send each investing
participant a confirmation of such
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<PAGE>
investment. Voluntary cash contributions will be returned to the
participant upon written request, provided that such request is received
more than two days before the Cut-off Date.
The Fund reserves the right to amend the Plan.
Additional information about the Plan may be obtained from the Agent.
See "MANAGEMENT OF THE FUND--Custodian and Transfer Agent."
CAPITAL STOCK
DIVIDENDS, VOTING AND LIQUIDATION RIGHTS
The Fund has one class of shares of Common Stock, par value $.01 per
share, of which 100,000,000 shares are authorized. When issued, shares of
Common Stock are fully paid and non-assessable. The Fund's shares have no
pre-emptive, conversion, exchange or redemption rights. Each share of the
Fund's Common Stock has one vote and shares equally in dividends and
distributions when and if declared by the Fund and in the Fund's net assets
upon liquidation. All voting rights for the election of directors are non-
cumulative. Consequently, the holders of more than 50% of the shares can
elect 100% of the directors then nominated for election if they choose to
do so and, in such event, the holders of the remaining shares will not be
able to elect any directors.
ANTI-TAKEOVER PROVISIONS IN THE ARTICLES OF INCORPORATION
The Fund's Articles of Incorporation and By-Laws include provisions
that are intended to have the effect of limiting the ability of other
entities or persons to acquire control of the Fund or to change the
composition of its Board of Directors and could have the effect of
depriving stockholders of an opportunity to sell their shares at a premium
over prevailing market prices by discouraging a third party from seeking to
obtain control of the Fund. The Board of Directors is divided into three
classes, each having a term of three years. The term of one class expires
at each annual meeting of stockholders. This provision could delay for up
to two years the replacement of a majority of the Board of Directors. The
votes of the holders of a majority of the outstanding shares is required to
elect a director. A director may be removed from office only by vote of
the holders of at least 75% of the shares of the Fund entitled to be voted
on the matter.
The Articles of Incorporation also require the favorable vote of the
holders of at least 75% of the shares of the Fund then entitled to be voted
to approve, adopt or authorize the following:
(i) a merger or consolidation of the Fund with another corporation,
(ii) a sale or transfer of all or substantially all of the Fund's
assets (other than in the regular course of the Fund's investment
activities),
-20-
<PAGE>
(iii) a liquidation or dissolution of the Fund, or
(iv) a change in the nature of the Fund's business so as to cease to
be an investment company,
unless such action has been approved, adopted or authorized by the
affirmative vote of 75% of the total number of directors fixed in
accordance with the bylaws, in which case the affirmative vote of a
majority of the outstanding shares is required.
In addition, the Articles of Incorporation provide that these anti-
takeover provisions may only be changed by the favorable votes of the
holders of at least 75% of the shares of the Fund then entitled to be
voted. The Board of Directors has determined that the 75% voting
requirements, which are greater than the minimum requirements under
Maryland law or the 1940 Act, are in the best interests of stockholders
generally.
OUTSTANDING SECURITIES
Set forth below is information with respect to the Fund's outstanding securities
as of December 16, 1996:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(1) (2) (3) (4)
Title of Class Amount Authorized Amount Held by Amount Outstanding
Registrant or for Exclusive of Amount
its Account Shown Under (3)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Common Stock, 100,000,000 0 10,960,829
par value
$0.01 per share
</TABLE>
-21-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Additional information about the Fund is contained in a Statement of
Additional Information, which is available upon request without charge by
contacting the Fund. Set forth below is the Table of Contents of the
Statement of Additional Information:
TABLE OF CONTENTS
-----------------
Investment Objectives and Policies
Management
Control Persons and Principal Holders of Securities
Investment Advisory and Other Services
Brokerage Allocation and Other Practices
Tax Status
Financial Statements
-22-
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE ADVISOR. THE PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT BE LAWFULLY MADE.
____________________________________
TABLE OF CONTENTS
<TABLE>
<S> <C>
Fee Table.................................................................
Financial Highlights......................................................
The Offer.................................................................
Use of Proceeds...........................................................
The Fund..................................................................
Management of the Fund....................................................
Distributions and Taxes...................................................
Dividend Reinvestment and Cash Purchase Plan..............................
Statement of Additional Information.......................................
</TABLE>
2,275,000 SHARES OF
COMMON STOCK ISSUABLE UPON
EXERCISE OF RIGHTS TO
SUBSCRIBE FOR SUCH SHARES
OF COMMON STOCK
BLUE CHIP VALUE FUND, INC.
_________________________
PROSPECTUS
_________________________
, 1997
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED _____________, 1997
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may any
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Statement of Additional Information does not constitute a
prospectus.
BLUE CHIP VALUE FUND, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
____________________, 1997
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies....................... 2
Management............................................... 3
Control Persons and Principal Holders of Securities...... 6
Investment Advisory and Other Services................... 6
Brokerage Allocation and Other Practices................. 8
Tax Status............................................... 9
Financial Statements..................................... 12
</TABLE>
This Statement of Additional Information applies to the Blue Chip Value
Fund, Inc. (the "Fund"). This Statement of Additional Information is not a
prospectus, and is meant to be read in conjunction with the Prospectus dated
________________, 1997 (the "Prospectus"), which describes the Fund. This
Statement of Additional Information is incorporated by reference in its entirety
into the Prospectus. Copies of the Prospectus may be obtained by calling the
Fund, at (800) 624-4190. Capitalized terms used but not defined herein have the
same meaning as in the Prospectus.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Prospectus for the Fund describes the investment objectives and
policies of the Fund. In addition to the non-fundamental policies listed in the
Prospectus, the following investment policy of the Fund is not deemed
fundamental and may be changed without stockholder approval.
Although it has not done so, the Fund is permitted, from time to time, to
lend its portfolio securities with an aggregate value not in excess of 25% of
its net assets to brokers, dealers, and financial institutions such as banks and
trust companies, for which it will receive collateral in cash or United States
Government securities that will be maintained on a daily basis in an amount
equal to at least 100% of the current market value of the loaned securities. The
Fund would not pay administrative, finders, or other fees in connection
therewith. The Fund would continue to receive dividends on the securities
loaned. Cash collateral would be invested in short-term debt securities, which
would increase the current income of the Fund. Although voting rights, or rights
to consent, attendant to securities on loan pass to the borrower, such loans may
be called at any time and will be called so that the securities may be voted if
a material event affecting the investment occurs. During the fiscal year ended
December 31, 1995, and for the six months ended June 30, 1996, the Fund did not
lend any portfolio securities.
PORTFOLIO TURNOVER
The portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the year by the monthly average
value of the portfolio securities. The calculation excludes all securities whose
maturities at the time of acquisition were one year or less. Portfolio turnover
may vary greatly from year to year as well as within a particular year, and may
also be affected by requirements which enable the Fund to receive certain
favorable tax treatment. Portfolio turnover will not be a limiting factor in
making portfolio decisions. For the fiscal years ended December 31, 1994 and
1995, the Fund's portfolio turnover rates were 62.77% and 50.84%, respectively.
For the six months ended June 30, 1996, the Fund's portfolio turnover rate was
22.18%.
-2-
<PAGE>
MANAGEMENT
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS AGE WITH THE FUND DURING PAST 5 YEARS
- ---------------- --- ------------- -----------------------
<S> <C> <C> <C>
*Kenneth V. Penland, 53 Chairman of the Chairman and Executive
C.F.A. Board and Director Manager, Denver
1225 Seventeenth Street Investment Advisors LLC
26th Floor (since 1995); prior
Denver, Colorado 80202 thereto Chairman of the
Board and Director of
Research, Denver
Investment Advisors, Inc.
Robert J. Greenebaum 78 Director Independent Consultant;
Room 957 Chairman of the Board
111 W. Washington Street and Director, Selected
Chicago, Illinois 60602 American Shares, Inc.
and Selected Special
Shares, Inc., Santa Fe,
New Mexico; Director,
United Asset Management
Corp., Boston,
Massachusetts; Chairman
of the Board and
Trustee, Selected Capital
Preservation Trust,
Santa Fe, New Mexico.
Consultant, Denver
Investment Advisors LLC,
and its predecessor,
Denver Investment Advisors,
Inc.
Robert M. Inman 56 Director Real Estate Investment
2847 South Locust Street Advisor and Consultant
Denver, Colorado 80222 (since 1988) (real estate
development and
construction); Director, First
National Bank of Parker, N.A.,
Parker, Colorado.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS AGE WITH THE FUND DURING PAST 5 YEARS
- ---------------- --- ------------- -----------------------
<S> <C> <C> <C>
Richard C. Schulte 51 Director President,
1860 Lincoln Street Transportation Service
12th Floor Systems, Inc.; Employee,
Denver, Colorado Southern Pacific Lines,
80295 Denver, Colorado (since
1993); prior thereto,
Employee, Rio Grande
Industries, Denver,
Colorado (holding
company) (since 1991)
Vice President Finance
and Treasurer, Rio
Grande Holdings, Inc.,
Denver, Colorado (since
1990); and Vice
President, Denver & Rio
Grande Western Railroad
Company, Denver, Colorado
Roberta M. Wilson, 52 Director Director of Finance,
C.F.A. Denver Board of Water
1600 W. Twelfth Commissioners, Denver,
Avenue Colorado.
Denver, Colorado
80254
Charles H. Anderson, 51 President President and Executive
C.F.A. Manager, Denver
1225 Seventeenth Investment Advisors LLC
Street (since 1995); prior
26th Floor thereto President and
Denver, Colorado Director of Portfolio
80202 Management, Denver
Investment Advisors,
Inc.; former director of
the Fund.
John R. Cormey, 48 Vice President Vice President and
C.F.A. Member, Denver
1225 Seventeenth Investment Advisors LLC
Street (since 1995); prior
26th Floor thereto Vice President
Denver, Colorado and Director of Fixed
80202 Income, Denver
Investment Advisors,
Inc., Denver, Colorado
(since 1991).
Varilyn K. Schock, 34 Vice President Vice President and
C.F.A. Member, Denver
1225 Seventeenth Investment Advisors LLC
Street (since 1995); prior
26th Floor thereto Vice President
Denver, Colorado and Director of
80202 Quantitative Strategies,
Denver Investment
Advisors, Inc. (since
1991).
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)- YEARS
NAME AND ADDRESS AGE WITH THE FUND DURING PAST 5
- ---------------- --- ------------- ------------------------------
<S> <C> <C> <C>
W. Bruce 53 Secretary Partner of the
McConnel, III law firm of
Philadelphia Drinker Biddle &
National Reath,
Bank Building Philadelphia, PA
1345 Chestnut
Street
Philadelphia, PA
19107
Steven G. Wine, 32 Treasurer Employee, Denver
1225 Seventeenth Investment
Street Advisors LLC
26th Floor (since 1995);
Denver, Colorado prior thereto
80202 Portfolio
Accounting
Analyst, Denver
Investment
Advisors, Inc.
(since 1988).
</TABLE>
______________________________
* Mr. Penland is considered by the Fund to be an "interested person" of
the Fund (as defined in the Investment Company Act of 1940).
No director or officer of the Fund who is also a director, officer, or
employee of the investment adviser or any of its parents, received any
remuneration from the Fund during 1995. The other directors taken as a group
were either paid or had accrued directors' fees for 1995 from the Fund in the
aggregate amount of $32,000. For the period ended June 30, 1996, the Fund paid
or accrued for the account of its directors as a group $15,927. Drinker Biddle &
Reath, of which W. Bruce McConnel, III, Secretary of the Fund, is a partner,
receives fees from the Fund for services rendered as its legal counsel.
In 1995 the directors received an annual retainer of $4,000 for
serving as directors, plus a meeting fee of $1,000 for each regular Board
meeting attended. The Fund expects the basis of such compensation will be the
same during 1996.
The following table provides information concerning the compensation
of each of the Fund's directors for services rendered during the Fund's fiscal
year ended December 31, 1995:
-5-
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR TOTAL
AGGREGATE RETIREMENT BENEFITS ESTIMATED COMPENSATION
COMPENSATION ACCRUED AS PART OF ANNUAL BENEFITS FROM FUND
NAME OF PERSON FROM FUND FUND EXPENSES UPON RETIREMENT PAID TO DIRECTORS
- -------------- ------------ ------------------- --------------- -----------------
<S> <C> <C> <C> <C>
Charles H. Anderson/(1)/ $ -0- $-0- $-0- $ -0-
Robert J. Greenebaum $8,000 $-0- $-0- $8,000
Robert M. Inman $8,000 $-0- $-0- $8,000
Kenneth V. Penland $ -0- $-0- $-0- $ -0-
Richard C. Schulte $8,000 $-0- $-0- $8,000
Roberta M. Wilson $8,000 $-0- $-0- $8,000
</TABLE>
______________________
/(1)/ Mr. Anderson resigned from the Board of Directors on March 31, 1995.
The Fund has a standing Audit Committee of the Board composed of Messrs.
Inman, Greenebaum and Schulte, and Ms. Wilson. The functions of the Audit
Committee are to meet with the Fund's independent auditors to review the scope
and findings of the annual audit, discuss the Fund's accounting policies,
discuss any recommendation of the independent auditors with respect to the
Fund's management practices, review the impact of changes in accounting
standards upon the Fund's financial statements, recommend to the Board of
Directors the selection of independent auditors, and perform such other duties
as may be assigned to the Committee by the Board of Directors.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of the date of this Statement of Additional Information, there were no
"Control Persons" as that term is defined in the Investment Company Act of 1940
(the "1940 Act").
As of December 10, 1996, Cede & Co. (as nominee for the Depository Trust
Company), 55 Water Street, New York, New York 10041, held of record 7,599,045
shares of the outstanding securities of the Fund.
As of the date of this Statement of Additional Information, the directors
and officers as a group owned 1.3% of the common stock of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISOR
Denver Investment Advisors LLC (the "Advisor") serves as investment advisor
for the Fund and is located at 1225
-6-
<PAGE>
Seventeenth Street, 26th Floor, Denver, Colorado 80202. Until March 31, 1995,
Denver Investment Advisors, Inc. ("DIA, Inc.") served as investment advisor for
the Fund. On March 31, 1995, the Advisor purchased certain of the assets and
assumed certain of the liabilities and obligations of DIA, Inc., and the
principal officers and all of the employees of DIA, Inc. became employed by the
Advisor. This transaction caused the Fund's previous investment advisory
agreement with DIA, Inc. to terminate automatically under the 1940 Act. The
current investment advisory agreement was approved by the stockholders at a
special meeting held on February 8, 1995. The current investment advisory
agreement is substantially the same as the Fund's previous investment advisory
agreement.
Kenneth V. Penland, Chairman and a director of the Fund, is an officer and
executive manager of the Advisor. Charles H. Anderson, President of the Fund, is
an officer and executive manager of the Advisor. John R. Cormey and Varilyn K.
Schock, both Vice Presidents of the Fund, are Vice Presidents and members of the
Advisor. Steven G. Wine, Treasurer of the Fund, is an employee of the Advisor.
For the fiscal years ended December 31, 1995, 1994 and 1993, the Fund paid
the Advisor (and its predecessor DIA, Inc.) $587,436, $542,350 and $499,567,
respectively, for investment advisory services. For the six months ended June
30, 1996, the Fund paid the Advisor $319,768 for investment advisory services.
The Investment Advisory Agreement dated April 1, 1995 between the Fund and
the Advisor (the "Agreement") provides that the advisory fee shall be reduced as
required by expense limitations imposed upon the Fund by any state in which
shares of the Fund are sold. The Fund is not presently subject to any such
expense limitations.
In the Agreement, the Advisor agrees, subject to the supervision of the
Fund's Board of Directors, to provide a continuous investment program and
strategy for the Fund, including investment research and management with respect
to all of its securities, other investments, and cash equivalents and to make
decisions with respect to and place orders for all purchases and sales of
portfolio securities. The Agreement also requires the Advisor to prepare or
supervise the preparation of reports to the Securities and Exchange Commission
or any other governmental authority; provide personnel to act as officers of the
Fund and pay the salaries of such officers; assist to the extent requested by
the Fund with the Fund's preparation of its annual and semiannual reports to
stockholders; transmit information concerning purchases and sales of the Fund's
portfolio securities to the custodian for proper settlement; supply the Fund and
its Board of Directors with reports and statistical data as requested; and
prepare a quarterly brokerage allocation summary.
-7-
<PAGE>
The Agreement provides that the Advisor will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of the agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the Advisor in the performance of its duties or from reckless disregard
of its obligations and duties under the Agreement.
ADMINISTRATOR
For the fiscal years ended December 31, 1995, 1994 and 1993, the Fund paid
American Data Services, Inc., the Fund's Administrator $94,708, $95,799 and
$89,149, respectively, for administrative services. For the six months ended
June 30, 1996, the Fund paid American Data Services, Inc. $47,227 for
administrative services.
CUSTODIAN
The custodian of the Fund's portfolio securities is Wells Fargo Bank, N.A.,
located at 633 Seventeenth Street, Denver, Colorado 80202. Pursuant to the
Custody Agreement between the Fund and Wells Fargo Bank, Wells Fargo provides
the following services: (i) maintains a separate account or accounts in the name
of the Fund; (ii) holds and disburses portfolio securities on account of the
Fund; (iii) collects and makes disbursements of money on behalf of the
Registrant; (iv) collects and receives all income and other payments and
distributions on account of the Fund's portfolio; (v) furnishes monthly to the
Fund a detailed statement of property held for the Fund under the Custody
agreement; (vi) maintains appropriate books and records for the Fund with
respect to its duties under the Custody Agreement and (vii) makes periodic
reports to the Fund concerning the Registrant's operations.
INDEPENDENT AUDITORS
Ernst & Young LLP, 370 Seventeenth Street, Suite 4300, Denver, Colorado
80202, serves as the Fund's independent auditors, providing audit services
including (1) audit of the annual financial statements, (2) assistance and
consultation in connection with SEC filings, and (3) review of the income tax
returns filed on behalf of the Fund.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Brokers are selected by the Advisor on the basis of best price and
execution for the Fund. In assessing best price and execution available to the
Fund, the Advisor will consider all factors it deems relevant, including the
breadth, of the market
-8-
<PAGE>
in the security, the price of the security, the financial condition and
execution capability of the broker/dealer, and the reasonableness of the
commission, if any, for the specific transaction and on a continuing basis. In
selecting brokers or dealers to execute particular transactions and in
evaluating best net price and execution available, the Advisor is authorized to
consider "brokerage and research services" (as defined in section 28(e) of the
Securities Exchange Act of 1934), statistical quotations, including the
quotations necessary to determine the Fund's net asset value, and other
information provided to the Fund and/or the Advisor or its affiliates. The
Advisor is authorized to cause the Fund to pay to brokers or dealers who provide
such brokerage and research services brokerage commissions which may be in
excess of the amount that another broker or dealer would have charged for
effecting the same transactions if the Advisor determines in good faith that
such amount of commissions is reasonable in relation to the value of brokerage
and research services provided by such brokers or dealers, viewed in terms of
the particular transaction or in terms of all of the accounts over which the
Advisor exercises investment discretion.
Research material furnished by brokers without cost to the Advisor, if any,
may tend to benefit Fund and other clients of the Advisor by improving the
quality of advice given; not all such research material furnished may be used by
the Advisor in connection with the Fund.
During the fiscal years ended December 31, 1995, 1994 and 1993, the Fund
paid brokerage commissions of $76,627, $143,071 and $102,406, respectively. For
the six months ended June 30, 1996, the Fund paid brokerage commissions of
$60,888.
TAX STATUS
FEDERAL
The Fund will be treated as a separate corporate entity under the Internal
Revenue Code of 1986, as amended (the "Code"), and intends to qualify as a
"regulated investment company." By following this policy, the Fund expects to
eliminate or reduce to a nominal amount the federal income taxes to which it may
be subject. If for any taxable year the Fund does not qualify for the special
federal tax treatment afforded regulated investment companies, all of the Fund's
taxable income would be subject to tax at regular corporate rates (without any
deduction for distributions to stockholders). In such event, the Fund's dividend
distributions to stockholders would be taxable as ordinary income to the extent
of the current and accumulated earnings and profits of the Fund and would be
eligible for the
-9-
<PAGE>
dividends received deduction in the case of corporate stockholders.
Qualification as a regulated investment company under the Code requires,
among other things, that the Fund distribute to its stockholders an amount equal
to at least the sum of 90% of its investment company taxable income (if any) and
90% of its tax-exempt income (if any), net of certain deductions for each
taxable year. In general, the Fund's investment company taxable income will be
its taxable income, including dividends, interest, and short-term capital gains
(the excess of net short-term capital gain over net long-term capital loss),
subject to certain adjustments and excluding the excess of net long-term capital
gain, if any, for the taxable year over the net short-term capital loss (if
any), for such year. The Fund will be taxed on its undistributed investment
company taxable income, if any. As stated, the Fund intends to distribute at
least 90% of its investment company taxable income (if any) for each taxable
year. To the extent such income is distributed by the Fund (whether in cash or
additional shares), it will be taxable to stockholders as ordinary income.
The Fund will not be treated as a regulated investment company under the
Code if 30% or more of the Fund's gross income for a taxable year is derived
from gains realized on the sale or other disposition of the following
investments held for less than three months (the "Short-Short test"): (1) stock
and securities (as defined in section 2(a)(36) of the 1940 Act); (2) options,
futures and forward contracts other than those on foreign currencies; and (3)
foreign currencies (and options, futures and forward contracts on foreign
currencies) that are not directly related to the Fund's principal business of
investing in stock and securities (and options and futures with respect to
stocks and securities). Interest (including original issue discount and accrued
market discount) received by the Fund upon maturity or disposition of a security
held for less than three months will not be treated as gross income derived from
the sale or other disposition of such security within the meaning of this
requirement. However, any other income that is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose.
Any distribution of the excess of net long-term capital gains over net
short-term capital losses is taxable to stockholders as long-term capital gains,
regardless of how long the stockholder has held Fund shares and whether such
gains are received in cash or additional Fund shares. The Fund will designate
such a distribution as a capital gain dividend in a written notice mailed to
stockholders after the close of the Fund's taxable year. It should be noted
that, upon the sale of Fund shares, if the stockholder has not held such shares
for more than six months, any loss on the sale of those shares will be
-10-
<PAGE>
treated as long-term capital loss to the extent of the capital gain dividends
received with respect to the shares.
Ordinary income of individuals is taxable at a maximum marginal rate of
39.6%, but because of limitations on itemized deductions otherwise allowable and
the phase-out of personal exemptions, the maximum effective marginal rate of tax
for some taxpayers may be higher. An individual's long-term capital gains are
taxable at a maximum nominal rate of 28%. For corporations, long-term capital
gains and ordinary income are both taxable at a maximum nominal rate of 35%.
A 4% non-deductible excise tax is imposed on regulated investment companies
that fail to currently distribute specific percentages of their ordinary taxable
income and capital gain net income (excess of capital gains over capital
losses). The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and any capital gain net income
prior to the end of each calendar year to avoid liability for this excise tax.
The Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or 31% of gross sale proceeds
upon sale paid to stockholders (i) who have failed to provide a correct tax
identification number in the manner required, (ii) who are subject to
withholding by the Internal Revenue Service for failure to properly include on
their return payments of taxable interest or dividends or (iii) who have failed
to certify to the Fund either that they are subject to backup withholding when
required to do so or that they are "exempt recipients."
STATE
Depending upon the extent of activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located or in which it is otherwise deemed to be conducting business, the Fund
may be subject to the tax laws of such states or localities.
Income distributions may be taxable to stockholders under state or local
law as dividend income even though all or a portion of such distributions may be
derived from interest on U.S. government obligations which, if realized
directly, would be exempt from such income taxes. Stockholders are advised to
consult their tax advisers concerning the application of state and local taxes.
-11-
<PAGE>
FINANCIAL STATEMENTS
Stockholders receive unaudited semi-annual reports describing the Fund's
investment operations and annual financial statements together with the report
of the independent auditors of the Fund. The unaudited financial statements and
notes thereto for the Fund contained in its Semi-Annual Report to Stockholders
dated June 30, 1996 and the audited financial statements and notes thereto for
the Fund contained in its Annual Report to Stockholders dated December 31, 1995,
are incorporated by reference into this Statement of Additional Information. No
other parts of the Semi-Annual Report or the Annual Report are incorporated by
reference herein. The financial statements and related notes thereto for the
Fund which appear in the Fund's Annual Report to Stockholders have been audited
by Ernst & Young LLP, whose report thereon also appears in such Annual Report
and is also incorporated herein by reference. Such audited financial statements
and notes thereto have been incorporated herein in reliance upon such report of
Ernst & Young LLP, independent auditors, given upon the authority of said firm
as experts in accounting and auditing. Additional copies of the Semi-Annual
Report and Annual Report may be obtained at no charge by telephoning the Fund at
(800) 624-4190.
-12-
<PAGE>
FORM N-2
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
1. Financial Statements
(a) Included in Part A hereof:
Financial Highlights for the period from commencement of
operations to June 30, 1996.
(b) Included in Part B hereof:
The financial statements and related notes thereto for the
fiscal period ended June 30, 1996, are incorporated herein
by reference to the Semi-Annual Report to Stockholders of
the Registrant as filed with the Securities and Exchange
Commission on July 26, 1996 pursuant to Rule 30b2-1 of the
Investment Company Act of 1940 (the "1940 Act") (No. 811-
5003).
The audited financial statements and related notes thereto
as well as the auditor's report thereon for the fiscal year
ended December 31, 1995 are incorporated herein by reference
to the Annual Report to Stockholders as filed with the
Securities and Exchange Commission on February 29, 1996
pursuant to Rule 30b2-1 of the 1940 Act (No. 811-5003).
2. Exhibits:
Pursuant to Rule 8b-32 under the 1940 Act and Rule 24 of the
Commission's Rules of Practice, Exhibits (a)(1), (a)(2), (b)(1),
(b)(2), (b)(3), (d), (g)(2), (g)(3), (j), and (k)(1) are
incorporated herein by reference as indicated below.
(a) (1) Articles of Incorporation of Registrant are
incorporated herein by reference to Exhibit (1) of
Registrant's Registration Statement on Form N-2 (No.
811-5003) filed on February 6, 1987.
(2) Articles of Amendment to Articles of Incorporation as
adopted by the Registrant's Board of Directors on
February 13, 1989, approved by the
<PAGE>
stockholders of the Registrant on May 11, 1989 and
filed with the State of Maryland on July 13, 1989 are
incorporated herein by reference to Exhibit (1)(b) of
Amendment No. 6 to Registrant's Registration Statement
on Form N-2 (No. 811-5003) filed on April 23, 1990.
(b) (1) By-Laws of Registrant are incorporated herein by
reference to Exhibit (2) of Pre-Effective Amendment No.
2 to Registrant's Registration Statement on Form N-2
(No. 811-5003) filed on March 27, 1987.
(2) Amendment to By-Laws of Registrant as adopted by
Registrant's Board of Directors on February 13, 1989 is
incorporated herein by reference to Exhibit 2(b) of
Amendment No. 5 to Registrant's Registration Statement
on Form N-2 (No. 811-5003) filed on May 2, 1989.
(3) Amendment to By-Laws of Registrant as adopted by
Registrant's Board of Directors on March 1, 1990 is
incorporated herein by reference to Exhibit 2(c) of
Amendment No. 6 to Registrant's Registration Statement
on Form N-2 (No. 811-5003) filed on April 23, 1990.
(c) Inapplicable.
(d) (1) Specimen certificate for shares of common stock of
Registrant is incorporated herein by reference to
Exhibits (4)(a) and (b) of Pre-Effective Amendment No.
3 to Registrant's Registration Statement on Form N-2
(No. 811-5003) filed on April 15, 1987.
(2) Form of subscription certificate.
(e) Dividend Reinvestment and Cash Purchase Plan.
(f) Inapplicable.
-2-
<PAGE>
(g) (1) Investment Advisory Agreement dated April 1, 1995
between Registrant and Denver Investment Advisors LLC.
(2) Investment Advisory Agreement dated April 7, 1987,
between Registrant and Denver Investment Advisors, Inc.
is incorporated herein by reference to Exhibit (6)(a)
of Amendment No. 4 to Registrant's Registration
Statement on Form N-2 (No. 811-5003) filed on April 28,
1988.
(3) Administrative Services Agreement dated January 1, 1989
between Registrant and American Data Services, Inc. is
incorporated herein by reference to Exhibit (6)(b) of
Amendment No. 6 to Registrant's Registration Statement
on Form N-2 (No. 811-5003) filed on April 23, 1990.
(h) Inapplicable.
(i) Inapplicable.
(j) Custody Agreement dated December 27, 1988, between the
Registrant and Wells Fargo Bank N.A. (formerly, First
Interstate Bank of Denver, N.A.) is incorporated herein by
reference to Exhibit (9) of Amendment No. 5 to Registrant's
Registration Statement on Form N-2 (No. 811-5003) filed on
May 2, 1989.
(k) (1) Service Agreement dated March 1, 1990 between the
Registrant and Chase Mellon Shareholder Services,
L.L.C. (formerly known as Mellon Securities Trust
Company) as Transfer Agent, Registrar and Dividend
Disbursing Agent for the Registrant is incorporated
herein by reference to Exhibit 10(a) of Amendment No. 7
to Registrant's Registration Statement on Form N-2 (No.
811-5003) filed on April 26, 1991.
(2) Form of Subscription Agent Agreement between the
Registrant and Chase Mellon Shareholder Services,
L.L.C.
(l) Opinion and consent of counsel.
-3-
<PAGE>
(m) Inapplicable.
(n) Consent of Ernst & Young LLP.
(o) Inapplicable.
(p) Inapplicable.
(q) Inapplicable.
(r) Financial Data Schedule.
ITEM 25. MARKETING ARRANGEMENTS
----------------------
Inapplicable.
ITEM 26 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
-------------------------------------------
Inapplicable.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-------------------------------------------------------------
Inapplicable.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
-------------------------------
As of October 31, 1996:
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
Common Stock 4,285
par value $.01
ITEM 29. INDEMNIFICATION
---------------
Section 2-418 of the General Corporation Law of Maryland authorizes
the indemnification of directors and officers of Maryland corporations
under specified circumstances.
Article VII, Section 7.4, of the Articles of Incorporation,
incorporated herein by reference as Exhibit (1)(b), provides that the
Registrant shall indemnify its directors and officers to the extent
permitted by the Maryland General Corporation Law. In no event will
registrant indemnify its directors or officers against any liability
to the Corporation or its security holders to which such person would
otherwise by subject by reason of willful misfeasance,
-4-
<PAGE>
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Section 6.2 of the By-Laws, incorporated herein by reference as
Exhibit (2)(a), provides that the Registrant shall indemnify its
directors and officers to the full extent permissible under applicable
state corporation law, the Securities Act of 1933, or the Investment
Company Act of 1940, provided that such indemnification shall not
protect any such person against any liability to the Corporation or
any stockholder thereof to which such person would otherwise by
subject by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his
office.
Indemnification of the Registrant's Advisor is provided for in Section
8 of the Investment Advisory Agreement, included as Exhibit (g)(1)
hereto.
Registrant has obtained from Gulf Insurance Company, a directors' and
officers' liability policy covering certain types of errors and
omissions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to the Registrant's directors,
officers, and controlling persons pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
----------------------------------------------------
Denver Investment Advisors LLC (the "Advisor") performs investment
advisory services for the Registrant and certain other investment
advisory customers. A
-5-
<PAGE>
description of the Advisor is included in Parts A and B of this
Registration Statement. For information regarding the business,
profession, vocation, or employment of a substantial nature that each
director, executive officer, partner or member of the Advisor has been
engaged in for his or her own account or in the capacity of director,
officer, employee, partner, trustee or member, reference is made to
the Form ADV (File #801-47933) filed by the Advisor under the
Investment Advisers Act of 1940.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
--------------------------------
(a) Denver Investment Advisors LLC, 1225 17th Street, Denver,
Colorado 80202 (records relating to its functions as investment
advisor).
(b) Wells Fargo Bank, N.A., 633 Seventeenth Street, Denver, Colorado
80202 (records relating to its function as custodian).
(c) Chase Mellon Shareholder Services, L.L.C., 85 Challenger Road,
Overpeck Centre, Ridgefield Park, NJ 07660 (records relating to
its function as transfer agent, dividend disbursing agent,
dividend and cash purchase plan agent, and subscription agent).
(d) American Data Services, Inc., 755 New York Avenue, Huntington,
New York 11743 (records relating to its function as administrator
and accounting agent).
(e) Drinker Biddle & Reath, PNB Building, 1345 Chestnut Street,
Philadelphia, PA 19107 (Registrant's Articles of Incorporation,
By-Laws, and Minute Books).
ITEM 32. MANAGEMENT SERVICES
-------------------
Inapplicable.
ITEM 33. UNDERTAKINGS
------------
Registrant undertakes to suspend the offering of shares until the
Prospectus is amended if (1) subsequent to the effective date of its
Registration Statement, the net asset declines more than ten percent
from its net asset value as of the effective date of the Registration
Statement or (2) the net asset value increases to an amount greater
than its net proceeds as stated in the Prospectus.
-6-
<PAGE>
Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days
of receipt of a written or oral request, a Statement of Additional
Information.
-7-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, and State of Colorado, on the
18th day of December, 1996.
BLUE CHIP VALUE FUND, INC.
By: /s/ Kenneth V. Penland
------------------------------
Kenneth V. Penland
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement of Blue Chip Value Fund, Inc. has been signed by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Kenneth V. Penland Chairman of the Board
- -------------------------- and Director (Principal December 18, 1996
Kenneth V. Penland Executive Officer)
/s/ C. H. Todger Anderson President December 18, 1996
- --------------------------
Charles H. Anderson
Robert M. Inman* Director December 18, 1996
Roberta M. Wilson* Director December 18, 1996
Richard C. Schulte* Director December 18, 1996
Robert J. Greenebaum* Director December 18, 1996
/s/ Steven G. Wine Treasurer (Principal December 18, 1996
- -------------------------- Accounting Officer and
Steven G. Wine Principal Financial
Officer)
*By:/s/ Kenneth V. Penland
-----------------------
Kenneth V. Penland
Attorney-in-fact
-8-
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO. PAGE
- ---------- ----
2(d)(2) - Form of Subscription Certificate ....................
2(e) - Dividend Reinvestment and Cash
Purchase Plan........................................
2(g)(1) - Investment Advisory Agreement between
Registrant and Denver Investment
Advisors LLC.........................................
2(k)(2) - Form of Subscription Agent Agreement.................
2(1) - Opinion and Consent of Counsel.......................
2(n) - Consent of Ernst & Young LLP.........................
24 - Power of Attorney....................................
27.1 - Financial Data Schedule..............................
27.2 - Financial Data Schedule..............................
-9-
<PAGE>
SUBSCRIPTION CERTIFICATE NUMBER NUMBER OF RIGHTS: CUSIP NO.
SUBSCRIPTION CERTIFICATE
The registered owner of this Subscription Certificate is entitled to
subscribe for one share (a "Share") of the Common Stock of Blue Chip Value Fund,
Inc. for every 5 rights ("Rights") held, one of which has been issued for each
share of Common Stock owned of record on ___________, 1997 (the "Record Date").
If such registered owner subscribes for the maximum number of Shares to which he
or she is entitled through the Basic Subscription Privilege, he or she is
entitled to subscribe for an unlimited number of additional Shares not otherwise
subscribed for pursuant to the Oversubscription Privilege, subject to proration
as described in the Prospectus dated February __, 1997, if there are sufficient
available Shares. For purposes of determining the number of Shares a holder may
acquire, shareholders whose shares are held of record on the Record Date by a
depository or nominee will be deemed to be holders of the Rights that are issued
to such depository or nominee. All subscriptions are subject to terms and
conditions set forth herein and in the Prospectus.
By: ChaseMellon Shareholder Services, L.L.C.
as Subscription Agent
THIS RIGHTS OFFERING EXPIRES AT 5:00 P.M., NEW YORK TIME, ON
MARCH 6, 1997 AND THIS SUBSCRIPTION CERTIFICATE IS VOID THEREAFTER.
THIS RIGHTS OFFERING HAS BEEN QUALIFIED OR IS BELIEVED TO BE
EXEMPT FROM QUALIFICATION ONLY UNDER THE FEDERAL LAWS OF THE UNITED
STATES AND THE LAWS OF THE STATES IN THE UNITED STATES. RESIDENTS OF
OTHER JURISDICTIONS MAY NOT PURCHASE THE SHARES OF COMMON STOCK OFFERED
HEREBY UNLESS THEY CERTIFY THAT THEIR PURCHASES OF SUCH SHARES ARE
EFFECTED IN ACCORDANCE WITH THE APPLICABLE LAWS OF SUCH JURISDICTIONS.
<PAGE>
SUBSCRIPTION TO PURCHASE SHARES OF COMMON STOCK
RETURN TO: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
Midtown Station 85 Challenger Road 120 Broadway, 13th Floor
P.O. Box _________ Overpeck Centre New York, NY 10271
New York, NY 10138-0814 Ridgefield Park, NJ 07660
Attention: Reorganization
1. Number of Shares subscribed for through the 2. Number of Shares
Basic Subscription Privilege (not to exceed subscribed for through the
one Share for each 5 Rights held): ___________ Oversubscrpition Privilege
Shares (No limit, except Basic
Subscription must be fully
exercised): ______________
Shares
4. Method of Payment (Check (A), (B) or (C): 3. Total Subscription Price
(sum of lines 1 and 2
multiplied by $____): $____
[_] (A) Certified, Cashier's or personal check payable to
ChaseMellon Shareholder Services, L.L.C.
or
[_] (B) Wire Transfer Directed to
Mellon Bank, Pittsburgh, PA
or
[_] (C) Notice of Guaranteed Delivery
_____________________________
AGREEMENT AND SIGNATURE
I hereby irrevocably subscribe for the number of Shares indicated above
upon the terms and conditions specified in the Prospectus relating thereto.
Receipt of the Prospectus is hereby acknowledged.
DATED: _______________, 1997
____________________________
____________________________
(Please date and sign exactly as your name appears on the reverse side of this
Subscription Certificate. Joint owners should each sign. If signing as
executor, administrator, attorney, trustee or guardian, give title as such. If
a corporation, sign in full corporate name by authorized officer. If a
partnership, sign in the name of authorized person.)
<PAGE>
TO BE EXECUTED ONLY BY NON-UNITED STATES RESIDENTS:
I hereby certify that the foregoing purchase of Shares has been
effected in accordance with the applicable laws of the jurisdiction in
which I reside.
DATED: _______________, 1997
____________________________
____________________________
<PAGE>
BLUE CHIP VALUE FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
1. PARTICIPATION. Any Shareholder of record of the Fund is eligible to
participate in the Plan provided that (i) such Shareholder fulfills the
prerequisites for of participation described below under "Enrollment Procedures"
and (ii) in the case of citizens or residents of a country other than the United
States, its territories, and possessions, participation would not violate local
laws applicable to the Fund or the participant. PARTICIPANTS IN THE FUND'S
PREVIOUS DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN WILL CONTINUE IN THE NEW
PLAN WITHOUT SENDING IN THE NEW ENROLLMENT FORM.
ENROLLMENT PROCEDURES. Shareholders of record may join the Plan by
completing and signing an Enrollment Form and returning it to Mellon Securities
Trust Company (the "Agent"). Shareholders should be sure to sign their names on
the Enrollment Form exactly as they appear on their certificates.
Common Stock held in a Securities Depository: Any beneficial owner of
Common Stock registered in the name of someone other than such beneficial owner
(for example, a broker or bank nominee) may participate in the dividend
reinvestment portion of the Plan by making arrangements with his or her broker
or bank to participate on his or her behalf through the
-1-
<PAGE>
Depository Trust Company Dividend Reinvestment Service. Broker and nominees
owning Common Stock held at Depository Trust Company may participate in the Plan
through such service.
Enrollment Forms will be processed as promptly as practicable.
Participation in the Plan will begin after the properly completed Enrollment
Form has been reviewed and accepted by the Agent.
2. DIVIDEND INVESTMENT ACCOUNT. The Agent will establish a Dividend
Investment Account (the "Account") for each shareholder participating in the
Plan. The Agent will credit the Account of each participant with funds it
receives from the following sources: (a) cash dividends paid on shares of the
Common Stock of the Fund registered in the participant's name on the books of
the Fund; (b) cash dividends paid on shares of Common Stock registered in the
name of the Agent but credited to the participant's Account; and (c) voluntary
cash contributions made pursuant to paragraph 4 hereof. Sources described in
clauses (a) and (b) of the preceding sentence are hereinafter called
"Distributions."
3. INVESTMENT OF FUNDS HELD IN EACH ACCOUNT. Funds credited to a
participant's Account will be used to purchase shares of the Fund's Common Stock
(the "Purchase"). With respect to funds derived from Distributions, the Agent
will attempt,
-2-
<PAGE>
commencing on the first trading and ending on the tenth trading day following
the record date, to acquire shares in the open market at a price, plus
commission which is less than the net asset value per share most recently
published by the Fund prior to any purchase. If and to the extent that the Agent
is unable to acquire sufficient shares of the Fund's Common Stock to satisfy the
Distribution at a price plus commission less than the Net Asset Value, the Fund
will issue to the Agent shares of the Fund's Common Stock, valued at the Net
Asset Value, in the aggregate amount of the remaining value of the Distribution.
All cash contributions to a participant's Account made pursuant to paragraph 4
hereof will be invested in shares of the Fund's Common Stock purchased in the
open market (irrespective of Net Asset Value).
4. VOLUNTARY CASH CONTRIBUTIONS. A Participant may from time to time make
voluntary cash contributions to his or her Account in an amount not less than
$50 and not in excess of $10,000 per month to acquire additional shares of
Common Stock of the Fund. In the case of any voluntary cash contribution which
exceeds $10,000 in a month, the cash contribution will be returned to the
participant by the Agent. The Agent will invest all voluntary cash
contributions on or about the last business day the month (the "Investment
Date") provided it receives the contributions at least two business days before
the last business day of the month (the "Cut-off Date"). Because interest is
not
-3-
<PAGE>
paid on voluntary cash contributions, participants should make such
contributions shortly before the Cut-off Date, allowing sufficient time for mail
delivery. Voluntary cash contributions received after the Cut-off Date will be
used to acquire additional shares of the Fund on the Investment Date of the
following month. Following any monthly investment of voluntary cash
contributions, the Agent will send each investing participant a confirmation of
such investment. Voluntary cash contributions will be returned to the
participant upon written request, provided that such request is received more
than two days before the Cut-off Date.
Additional investments may be made in the following ways:
CHECK INVESTMENT. Additional cash investments and initial investments may
be made by personal check or money order payable in U.S. dollars to MSTS/Blue
Chip. Optional cash investments must be mailed to the Agent together with the
detachable portion of the Statement of Account sent to participants.
WIRE INVESTMENT. Optional cash investments may be made by wire transfer to
the Agent. Participants who wish to make a wire transfer should contact the
Agent for instructions. Participants making wire investments may be charged
fees by the commercial bank initiating the transfer and will be charged a fee of
$10.00 by the Plan Agent to process the transfer of funds.
-4-
<PAGE>
Wires should be initiated so that funds will be received at least two
business days before the last business day of the month (the "Cut-Off" Date).
AUTOMATIC INVESTMENT FROM A BANK ACCOUNT. Participants may make automatic
monthly investments of a specified amount (not less than $50 and not in excess
of $10,000 per month) by electronic funds transfer from a pre-designated U.S.
bank account.
To initiate automatic monthly investments, the participant must complete
and sign an Automatic Investment Form and return it to the Agent together with a
voided blank check for the account from which funds are to be drawn. Automatic
Investment Forms may be obtained from the Agent. Forms will be processed and
will become effective as promptly as practicable.
Once automatic monthly investments are initiated, funds will be drawn from
the participant's designated bank account approximately three business days
preceding the Investment Date of each month, and will be invested in Common
Stock on that Investment Date.
Participants may change or terminate automatic monthly investments by
completing and submitting to the Agent a new Automatic Investment Form.
-5-
<PAGE>
5. ADJUSTMENT OF PURCHASE PRICE. The Fund will increase the price at
which its shares may be issued to the Plan if the Net Asset Value is less than
95% of the fair market value of such shares on any Distribution payment date
unless the Fund receives a legal opinion from independent counsel that the
issuance of shares at Net Asset Value under the circumstances will not have a
material adverse effect upon the federal income tax liability of the Fund.
6. DETERMINATION OF PURCHASE PRICE. The cost of shares and fractional
shares acquired for each participant's Account in connection with a Purchase
shall be determined by the average cost per share, including brokerage
commission, of the shares acquired by the Agent in connection with that
Purchase. Stockholders will receive a confirmation, showing the average cost
and number of shares acquired as soon as practicable after the Agent has
received or purchased shares. The Agent may mingle the cash in a participant's
account with similar funds of other participants of the Fund for whom it acts as
Agent under the Plan.
7. SERVICE CHARGES. There is no service charge by the Agent to
stockholders who participate in the Plan. However, the Fund reserves the right
to amend the Plan in the future to include a service charge.
-6-
<PAGE>
8. SHARES HELD BY AGENT. The Agent will maintain the participant's
Account and hold the shares acquired through the Plan in safekeeping. Upon
request to the Agent, a certificate for any or all full shares in a
participant's Account will be sent within two weeks of such request to the
participant.
9. MINIMUM SHARE BALANCE. Participants must own of record at least fifty
shares in order to enroll in the Plan and must maintain a balance of at least
fifty Shares in the Plan at all times after enrollment in order to continue to
participate in the Plan.
10. GIFT/TRANSFER OF SHARES. Shareholders may transfer all or any number
of shares of Common Stock held under the Plan to a Plan account for another
person, whether by gift, private sale or otherwise, by mailing to the Agent a
properly completed Share Transfer Form, with signature guaranteed by an eligible
guarantor institution. Such institutions generally include banks, brokers,
dealers, credit unions, savings associations and other entities which are
members in good standing of the Agent's Medallion Program. The transferee will
automatically be enrolled in the Plan provided that the minimum 50 Shares
Balance requirement has been met and will receive a statement showing the number
of shares transferred to and held in the transferee's Plan account. Share
Transfer Forms are available upon request from the Agent.
-7-
<PAGE>
11. INDIVIDUAL RETIREMENT ACCOUNTS. Shareholders may use the Plan to
establish an Individual Retirement Account (IRA) and to make contributions to
the IRA or to roll over an existing IRA or other qualified plan distribution.
An annual administrative fee will be charged for maintaining an IRA account.
IRA assets will be liquidated to pay this fee unless the shareholder pays it
directly. For further information and Enrollment Forms, please contact the
Agent.
12. REPORTS TO PARTICIPANTS. Each participant will receive a statement
after any transaction in her or his Plan account showing the amount invested,
the purchase price, the number of shares purchased, deposited, sold, transferred
or withdrawn, the total number of Shares accumulated, and other information.
The statement will consolidate all shares held for the Plan account or
registered in the participant's name. Participants should retain these
statements so as to be able to establish the cost basis of shares purchased
under the Plan for income tax and other purposes.
Since all notices, statements and reports from the Agent will be addressed
to the latest address of record, participants must promptly notify the Agent of
any change of address.
13. ODD-LOT SALES. If a participant holds fewer than 100 shares, whether
or not such Shares are held in a Plan account, he
-8-
<PAGE>
or she may sell all (but not less than all) of such shares at any time and pay
no brokerage fees or commissions. To sell shares, complete and return to the
Agent, by registered, insured mail, the share certificates along with a written
letter of instruction, signed by all registered holders, to proceed with the
sale of shares through the Odd Lot Program. A participant who cannot locate the
required share certificates should call the Agent for the appropriate forms.
14. WITHDRAWAL FROM PLAN. Stockholders may join or withdraw from the Plan
at any time by giving the Agent written notice. Within two weeks of such
notice, the participant will receive a certificate for full shares in the
Account, plus a check for any fractional shares based on market price. A notice
will not be effective as to subsequent Distributions unless it is received at
least five days before the record date for the Distribution.
15. AMENDMENTS. Experience under the Plan may indicate that changes are
desirable. Accordingly, the Fund reserves the right to amend or terminate the
Plan, or change the Agent, as applied to any Distribution paid subsequent to
notice thereof sent to participants in the Plan at least thirty days before the
record date for such Distribution.
-9-
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of April 1, 1995 between BLUE CHIP VALUE FUND, INC.,
a Maryland corporation (the "Fund"), and Denver Investment Advisors LLC (the
"Investment Advisor") a Colorado limited liability company.
WHEREAS, the Fund is registered as a closed-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended ("1940 Act"); and
WHEREAS, the Fund desires to retain the Investment Advisor to furnish
investment advisory and certain administrative services to the Fund and the
Investment Advisor is willing to so furnish such services;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints the Investment Advisor to
-----------
act as its investment adviser for the period and on the terms set forth in this
Agreement. The Investment Advisor accepts such appointment and agrees to furnish
the services herein set forth, for the compensation herein provided.
2. Management. Subject to the supervision of the Fund's Board of
----------
Directors, the Investment Advisor will perform the following services:
(i) Provide a continuous investment program and strategy for the
Fund, including investment research and management with respect to all
securities and investments and cash equivalents in the Fund,
determining from time to time what securities and other investments
will be invested, reinvested, owned, held or traded by the Fund. The
Investment Advisor will provide this service under this Agreement in
accordance with the Fund's investment objective, policies and
restrictions as stated in the Prospectus and resolutions of the Fund's
Board of Directors adopted from time to time;
(ii) Prepare or supervise the preparation of the Fund's Annual
and Semi-Annual Reports to the Securities and Exchange Commission and
any other report required by the securities, investment, tax or other
laws of the
<PAGE>
United States and the various states in which the Fund does business;
(iii) The Investment Advisor shall, to the extent requested by
the Board of Directors, provide the personnel to act as officers of
the Fund and pay the salaries of such officers (except the Secretary),
and shall furnish office facilities and equipment, and stenographic
services necessary for the operation of the Fund.
(iv) Assist to the extent requested by the Fund with the Fund's
preparation of its Annual and Semi-Annual Reports to shareholders;
(v) Transmit information concerning purchases and sales of the
Fund's portfolio securities to the custodian for proper settlement;
(vi) Supply the Fund and its Board of Directors with reports and
statistical data as requested; and
(vii) Prepare a quarterly brokerage allocation summary and
monthly security transaction listing for the Fund.
3. Other Covenants.
---------------
The Investment Advisor further agrees that:
(i) It will conform with all applicable Rules and Regulations
of the Securities and Exchange Commission;
(ii) It will place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with
any broker or dealer. In executing portfolio transactions and
selecting brokers or dealers, the Investment Advisor will use its best
efforts to seek on behalf of the Fund the best overall terms
available. In assessing the best overall terms available for any
transaction, the wazzu Investment Advisor shall consider all factors
that it deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness
of the commission, if any, both for the specific transaction and on a
continuing basis. In evaluating the best overall terms available, and
in selecting the broker dealer to execute a particular transaction,
the Investment Advisor may also consider the brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act
A-2
<PAGE>
of 1934) provided to the Fund and/or other accounts over which the
Investment Advisor or an affiliate of the Investment Advisor exercises
investment discretion. The Investment Advisor is authorized, subject
to the prior approval of the Fund's Board of Directors, to pay to a
broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Fund which is
in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction if, but only if, the
Investment Advisor determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of that
particular transaction or in terms of the overall responsibilities of
the Investment Advisor to the Fund. The Investment Advisor will make
investment decisions for the Fund independently from those of other
clients of the Investment Advisor. However, the same security may be
held in the portfolio of more than one client when the same security
is believed suited for the investment objectives of more than one
client. Should two or more clients of the Investment Advisor
simultaneously be engaged in the purchase or sale of the same
security, to the extent possible, the transactions will be allocated
as to price and amount in a manner fair and equitable to each client;
and
(iii) Maintain or supervise the maintenance of all books and
records with respect to the securities transactions of the Fund, keep
its books of account and will furnish the Fund's Board of Directors
with such periodic and special reports as the Board may request.
4. Services Not Exclusive. The investment management services
----------------------
furnished by the Investment Advisor hereunder are deemed not to be exclusive,
and the Investment Advisor shall be free to furnish similar services to others
so long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule
-----------------
31a-3 under the 1940 Act, the Investment Advisor hereby agrees that all records
which it maintains for the Fund are the property of the Fund and further agrees
to surrender promptly to the Fund any of such records upon the Fund's request.
The Investment Advisor further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-
1 under the 1940 Act.
6. Expenses. During the term of this Agreement, the Investment
--------
Advisor will pay all expenses incurred by it in connection with its activities
under this Agreement other than
A-3
<PAGE>
the cost of securities (including brokerage commissions, if any) purchased for
the Fund.
7. Compensation. For the services provided to the Fund pursuant to
------------
this Agreement, the Fund will pay to the Investment Advisor a fee, payable on or
before the tenth (10th) day of each calendar month, at the annual rates of
sixty-five one-hundredths of one percent (0.65%) of the average of the first
$100,000,000 of the net asset values of the Fund and fifty one-hundredths of one
percent (0.50%) of the average of the net asset values of the Fund in excess of
$100,000,000 as of the close of the last business day of the New York Stock
Exchange in each calendar week during the preceding calendar month. Such fees
shall be reduced as required by expense limitations imposed upon the Fund by any
state in which shares of the Fund are sold. Reductions shall be made at the time
of each monthly payment on an estimated basis, if appropriate, and an adjustment
to reflect the reduction on an annual basis shall be made, if necessary, in the
fee payable with respect to the last month in any calendar year of the Fund. The
Investment Advisor shall within ten (10) days after the end of each calendar
year refund any amount paid in excess of the fee determined to be due for such
year.
If this Agreement shall become effective subsequent to the first day
of a month, or shall terminate before the last day of a month, the Investment
Advisor's compensation for such fraction of the month shall be determined by
applying the foregoing percentages to the average of the weekly net asset values
of the Fund during such fraction of a month (or, if none, to the asset value of
the Fund as calculated on the last day of the preceding month on which the New
York Stock Exchange was open for trading) and in the proportion that such
fraction of a month bears to the entire month.
8. Limitation of Liability. The Investment Advisor shall not be
-----------------------
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on continue the part of the Investment Advisor in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also an officer,
partner, employee, or agent of the Investment Advisor, who may be or become an
officer, director, employee or agent of the Fund, shall be deemed, when
rendering service to the Fund or acting on any business of the Fund (other than
services or business in connection with the Investment Advisor's duties as
investment adviser hereunder), to be rendering such services to or acting
solely, for, the Fund and not as an officer, partner, employee or
A-4
<PAGE>
agent or one under the control or direction of the Investment Advisor even
though paid by it.
9. Duration and Termination. This Agreement, unless sooner terminated
------------------------
as provided herein, shall in effect until April 7, 1996. Thereafter, if not
terminated, this Agreement shall continue in effect for successive annual
periods, provided such continuance is specifically approved at least annually
--------
(a) by the vote of a majority of those members of the Fund's Board of Directors
who are not interested persons of any party to this Agreement, cast in person at
a meeting called for the purpose of voting on such approval, and (b) by the
Fund's Board of Directors or by vote of a majority of the outstanding voting
securities of the Fund. Notwithstanding the foregoing, this Agreement may be
terminated at any time, without the payment of any penalty, by the Fund (by vote
of the Fund's Board of Directors or by vote of a majority of the outstanding
voting securities of the Fund), or by the Investment Advisor on sixty days'
written notice. This Agreement will immediately and automatically terminate in
the event of its assignment. The Investment Advisor's obligations pursuant to
section 2 of this Agreement with respect to dates up to the time of termination
of this Agreement shall survive the termination of this Agreement. (As used in
this Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meaning of such terms
in the 1940 Act.)
10. Amendment of this Agreement. No provision of this Agreement may be
---------------------------
changed, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought. No amendment of this Agreement shall be effective
until approved by vote of a majority of the outstanding voting securities of the
Fund.
11. Miscellaneous. Any notice made pursuant to this Agreement shall
-------------
be given in writing, addressed and delivered or mailed postage prepaid, return-
receipt requested, to the other party to this Agreement at its principal place
of business. Notice given by a party's attorney shall be deemed to be notice
given by the party. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provisions of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by Maryland law.
A-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
BLUE CHIP VALUE FUND, INC.
/s/Kenneth V. Penland
--------------------------
By: Kenneth V. Penland
-----------------------
Title: Chairman
--------------------
DENVER INVESTMENT ADVISORS LLC
/s/ Todger Anderson
--------------------------
By: Todger Anderson
-----------------------
Title: President
--------------------
A-6
<PAGE>
This SUBSCRIPTION AGENT AGREEMENT (this "Agreement"), dated as of__________
_________ by and between Blue Chip Value Fund, Inc. (the "Company"), and
ChaseMellon Shareholder Services, L.L.C. (the "Subscription Agent").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has authorized and declared
a distribution (the "Rights Offering") of one right (a "Right") for each share
of Common Stock, $ .01 par value, held of record by shareholders of the Company
(the "Shareholders") on ____________________ (the "Record Date");
WHEREAS, the Company has filed a registration statement with the Securities
and Exchange Commission on ___________ on Form N-2, which became effective on __
__________, and has also filed with the Commission a prospectus (the
"Prospectus") dated ________________, each of which relates to the Rights
Offering;
WHEREAS, each Shareholder is entitled to subscribe for and purchase at a
subscription price ("Subscription Price") as described in the Prospectus one
share of Common Stock of the Company (a "Share" and collectively, the "Shares")
for each five (5) Rights held, and under certain circumstances, shares not
acquired by exercise of primary subscription rights, upon the terms and subject
to the conditions hereinafter set forth; and
WHEREAS, the Company desires the Subscription Agent to act on behalf of the
Company, and the Subscription Agent is willing so to act, in connection with the
issuance and exercise of Rights and other matters as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Subscription Agent. The Company hereby appoints
---------------------------------
the Subscription Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in the Agreement, and the Subscription Agent
hereby accepts such appointment.
SECTION 2. Duties of Subscription Agent
----------------------------
(a) The Subscription Agent shall, from a list of Shareholders as of
the Record Date to be prepared by the Subscription Agent in its capacity as
transfer agent of the Company prepare and record subscription rights
("Subscription Rights") in the
<PAGE>
names of the Shareholders, setting forth the number of Rights to subscribe to
the Shares calculated on the basis of one Right for each Share recorded on the
Company books in the name of each shareholder as of the Record Date.
(b) Each Subscription . Right shall be non-transferable and shall, if
exercised by the holder thereof in the manner set forth in the Prospectus,
become irrevocable upon the expiration of the Rights Offering. The Subscription
Agent shall, in its capacity as transfer agent for the Company, maintain a
register of Subscription Rights and the holders of record thereof (each of whom
shall be deemed a "Shareholder" hereunder for purposes of determining the rights
of holders of Subscription Rights). Each Subscription Right shall, subject to
the provisions thereof, entitle the Shareholder in whose name it is recorded to
the following:
(1) The right (the "Basic Subscription Right") to purchase a
number of Shares equal to one Share for every five (5) Subscription Rights;
provided, however, that no Rights Certificates which evidence fractional rights
and no fractional Shares shall be issued; and
(2) The right (the "Oversubscription Right") to purchase from
the Company additional Shares, subject to the availability of such shares and to
allotment of such shares as may be available among Shareholders who exercise
Oversubscription Rights on the basis specified in the Prospectus; provided,
however, that a Shareholder who has not exercised his Basic Subscription Rights
with respect to the full number of shares that such Shareholder is entitled to
purchase by virtue of his Basic Subscription Rights as of the Expiration Date,
if any, shall not be entitled to any Oversubscription Rights.
(c) A Shareholder may exercise his Basic Subscription Rights and
Oversubscription Rights by delivery to the Subscription Agent at its corporate
office specified in the Prospectus of (i) the Subscription Right with respect
thereto, duly executed by such Shareholder in accordance with and as provided by
the terms and conditions of the Subscription Right, together with (ii) the
assumed purchase price for each share of Common Stock subscribed for by exercise
of such Rights, in United States dollars by money order or check drawn on a bank
located in the continental United States and in each case payable to the order
of ChaseMellon Shareholder Services, L.L.C.
(d) Rights may be exercised at any time after the date of issuance of
the Subscription Rights with respect thereto but no later than 5:00 p.m. Eastern
Daylight Time on such date as the Company shall designate to the Subscription
Agent in writing (the "Expiration Date"). For the purpose of determining the
time of the exercise of any Rights, delivery of any material to the Subscription
Agent shall be deemed to occur
<PAGE>
when such materials are received at the corporate office of the Subscription
Agent specified in the Prospectus.
(e) Notwithstanding the provisions of Section 2(c) and 2(d) regarding
delivery of an executed Subscription Right to the Agent prior to 5:00 p.m.
Eastern Daylight Time on the Expiration Date, if prior to such time the Agent
receives notice of guaranteed delivery by mail or otherwise from a bank, trust
company or a New York Stock Exchange member guaranteeing delivery of (i) full
payment for shares purchased and subscribed for by virtue of a Shareholder's
Rights, and (ii) a properly completed and executed Exercise Form, then such
exercise of Basic Subscription Rights and Oversubscription Rights shall be
regarded as timely, subject, however, to receipt of the duly executed Exercise
Form by the Agent within five business days after the Expiration Date.
(f) Within five business days following the Pricing Date as defined
in the Prospectus (the "Confirmation Date"), the Agent shall send a confirmation
to each Shareholder (or, for Shares on the Record Date held by Cede & Co. or any
other depository or nominee, to Cede & Co. or such other depository or nominee),
showing (i) the number of Shares acquired pursuant to the Basic Subscription
Rights, (ii) the number of Shares, if any, acquired pursuant to the
Oversubscription Rights, (iii) the per Share total purchase price for the
Shares, (iv) any amount payable to the Shareholder pursuant to Section 2(i), and
(v) any additional amount payable by such Shareholder to the Company or any
excess to be refunded by the Company to such Shareholder, in each case based on
the Subscription Price as determined on the Pricing Date. Any additional payment
acquired from a Shareholder must be received by the Subscription Agent within
ten business days after the Confirmation Date. Any excess payment to be refunded
by the Company to a Shareholder shall be mailed by the Subscription Agent to the
Shareholder within fifteen business days after the Confirmation Date, as
provided in Section 2(i) below.
(g) If, after allocation of Shares to persons exercising Basic
Subscription Rights, there remain unexercised Rights, then the Subscription
Agent shall allot the shares issuable upon exercise of such unexercised Rights
(the "Remaining Shares") to persons exercising Oversubscription Rights, in the
amounts of such oversubscriptions. If the number of shares for which
Oversubscription Rights have been exercised is greater than the Remaining
Shares, the Subscription Agent shall allot the Remaining Shares to the persons
exercising Oversubscription Rights pro rata based solely on the number of Shares
held on the Record Date.
(h) All proceeds from the exercise of Rights shall be held by the
Subscription Agent in a segregated, interest-bearing account in the name of the
<PAGE>
Company. The Subscription Agent shall advise the Company immediately upon the
completion of the allocation set forth above as to the total number of Shares
subscribed and distributable.
(i) (1) The Subscription Agent shall mail to the Shareholders within
fifteen business days after the Confirmation Date and after full payment for
subscribed Shares has cleared: (i) certificates representing those shares
purchased pursuant to exercise of Basic Subscription Rights and those shares
purchased pursuant to the exercise of Oversubscription Rights; and (ii) in the
case of each Shareholder who subscribed and paid for the Shares at an assumed
purchase price greater than the actual per share purchase price, a refund in the
amount of the difference between the assumed purchase price and the actual
purchase price.
(2) The Subscription Agent shall deliver the proceeds of
the exercise of Rights to the Company as promptly as practicable, but in no
event later than fifteen business days after the Confirmation Date.
(j) The Subscription Agent shall account promptly to the Company with
respect to Rights exercised and concurrently account for all monies received and
returned by the Subscription Agent with respect to the purchase of Shares upon
the exercise of Rights.
(k) In the event the Subscription Agent does not receive, within ten
business days after the Confirmation Date, any amount due from a Shareholder as
specified in Section 2(f),then it shall take such action with respect to such
Shareholder's Subscription Rights as may be instructed in writing by the
Company, including, without limitation, (i) applying any payment actually
received by it toward the purchase of the greatest whole number of Shares which
could be acquired with such payment, (ii) allocating the shares subject to such
Subscription Rights to one or more other Shareholders, and (iii) selling all or
a portion of the Shares deliverable upon exercise of such Subscription Rights on
the open market, and applying the proceeds thereof to the amount owed.
(l) No Subscription Right shall entitle a Shareholder to vote or
receive dividends or be deemed the holder of Shares for any purpose, nor shall
anything contained in any Subscription Right be construed to confer upon any
Shareholder any of the rights of a shareholder of the Company or any right to
vote, given or withhold consent to any action by the Company (whether upon any
recapitalization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings or other action
affecting shareholders or receive dividends or otherwise, until the Rights
evidenced thereby shall have been exercised and the Shares
<PAGE>
purchasable upon the exercise thereof shall have become deliverable as provided
in this Agreement and in the Prospectus.
SECTION 3. Issuance of Securities. The Company has authorized, and will
-----------------------
hold in reserve, a number of Shares sufficient to provide for the exercise of
the Rights.
SECTION 4. Form of Rights Certificates. The Rights Certificates (and the
----------------------------
subscription forms to purchase Shares) shall be substantially in the form
attached as Exhibit A hereto. Each Rights Certificate shall be dated as of the
date of issuance thereof by the Subscription Agent, and on its face shall
entitle the holder to subscribe and purchase one Share for each five (5) Rights
at the Subscription Price.
SECTION 5. Validation of Rights Certificates
---------------------------------
(a) The Rights Certificates shall be printed with the name of the
Company and the Subscription Agent as shown on Exhibit A, which printed names
shall be valid without further signature or countersignatures.
(b) The Subscription Agent shall maintain at its offices books and
records showing the holders of the Rights Certificates, the number of Rights
held and the disposition of those Rights, whether through exercise, expiration
or otherwise.
SECTION 6. Mutilated, Destroyed, Lost or Stolen Rights Certificates. Upon
---------------------------------------------------------
receipt by the Company and the Subscription Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, the Subscription Agent will make and deliver a new Rights
Certificate of like tenor to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated; or it shall issue those
Shares being purchased by a shareholder by the exercise of Rights if the
conditions to such issuance are otherwise met, e.g., payment, without
-----
replacement of a Rights Certificate. If the Company requires an indemnity bond,
such indemnity bond shall be in such form as shall be sufficient in the
Company's judgment to protect the Company from any loss which it may suffer if a
Rights Certificate is replaced.
SECTION 7. Subsequent Issuance of Rights Certificates. Subsequent to
-------------------------------------------
their original issuance, no Rights Certificates shall be issued except for split
up or exchange of Rights Certificates held by securities depositories, brokers
or other nominees or those issued in replacement of mutilated, destroyed, lost
or stolen Rights Certificates.
<PAGE>
SECTION 8. Exercise of Rights. Only the registered holder of any Rights
-------------------
Certificate may exercise the Rights evidenced thereby in accordance with
instructions of the Rights Certificate and in the Prospectus.
SECTION 9. Reports. The Subscription Agent shall notify both the Company
--------
and its designated representatives by telephone as requested during the period
commencing with the mailing of the Rights Certificates and ending on the
Expiration Date, which notices shall thereafter be confirmed in writing, of (i)
the number of Rights exercised on the day requested, (ii) the number of Rights
for which defective exercises have been received on such day, and (iii) the
cumulative total of the information set forth in clauses (i) and (ii) above.
The Subscription Agent shall also maintain and update a listing of holders who
have fully or partially exercised their Rights, and holders who have not
exercised their Rights. The Subscription Agent shall provide the Company or its
designated representatives, upon their request, with the information compiled
pursuant to the Prospectus. The Subscription Agent will also make available
when reasonably requested by the Company, various other data including data
showing demographics of Shareholders who exercise Rights, and those who
participate in the oversubscription and, conversely, those who did not exercise
Rights or participate in the oversubscription.
SECTION 10. Future Instructions and Interpretations
---------------------------------------
(a) All questions concerning the timeliness, validity, form and
eligibility of any exercise of Rights will be determined by the Company, whose
determination will be final and binding. The Company in its sole discretion may
waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported exercise
of any Right. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
Company determines in its sole discretion. Neither the Company nor the
Subscription Agent will be under any duty to give notification of any defect or
irregularity in connection with the submission of Subscription Certificates or
incur any liability for failure to give such notification, although the
Subscription Agent will give such notices at the Company's request in certain
instances.
(b) The Subscription Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, President or Treasurer of the Company, and to apply to
any such officer for advice and instructions in connection with its duties, and
the Subscription Agent shall not be liable for any actions taken or suffered to
be taken by it in good faith in accordance with instructions of any such
officer.
<PAGE>
SECTION 11. Payment of Taxes. The Company covenants and agrees that it
-----------------
will pay when due and payable all documentary stamp and other taxes, if any,
which may be payable in respect of the issuance and delivery of any Rights
Certificates or of the Shares purchasable upon the exercise of the Rights;
provided, however, that the Company shall not be liable for any tax liability
(i) arising out of any transaction which it results in, or is deemed to be, an
exchange of Rights or Shares or a constructive dividend with respect to Rights
or Shares or (ii) based on taxes on income.
SECTION 12. Cancellation and Destruction of Rights Certificates. All
----------------------------------------------------
Rights Certificates surrendered for the purpose of exercise shall, if
surrendered to the Company or to any of its agents, be delivered to the
Subscription Agent for cancellation or in cancelled form or, if surrendered to
the Subscription Agent, shall be cancelled by it, and no Rights Certificates
shall be issued in lieu thereof, except as expressly permitted by provisions of
this Agreement. The Subscription Agent shall deliver all cancelled Rights
Certificates to the Company, or shall, at the written request of the Company,
destroy such cancelled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
SECTION 13. Record Date. Each person in whose name a Share is issued in
------------
accordance with the terms hereof shall for all purposes be deemed to have become
the holder of record of such securities represented thereby on, and such
certificates shall be dated, the date the certificates are issued by the
Subscription Agent.
SECTION 14. Rights and Obligations of Subscription Agent under the
------------------------------------------------------
Prospectus.
- -----------
(a) Not withstanding anything contained in this Agreement to the
contrary, and in addition to and not in lieu of any of the rights and
obligations of the Subscription Agent under this Agreement, the Subscription
Agent shall be bound by, and act in accordance with, the terms of the Prospectus
with respect to the Rights offering.
(b) The Subscription Agent shall provide services in a reasonable and
prudent manner so that it can efficiently handle the Rights Offering, including,
for example, issuing notices of deficiencies, refunds or collections,
communications with Shareholders or their representatives, and allocating Shares
requested and paid for by subscribing Shareholders in accordance with the terms
in the Prospectus.
<PAGE>
SECTION 15. Concerning the Subscription Agent
---------------------------------
(a) The Company agrees to pay to the Subscription Agent reasonable
compensation for all services rendered by it hereunder as in a one page fee
schedule signed by the Company attached hereto, and, from time to time, on
demand of the Subscription Agent, its reasonable expenses and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder.
(b) The Subscription Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered, or omitted by it in
connection with its duties under this Agreement in reliance upon any Rights
Certificate, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or document believed
by it to be genuine and to be signed, executed and where necessary, guaranteed,
verified or acknowledged, by the proper person or persons.
SECTION 16. Merger or Consolidation or Change of Name of Subscription
---------------------------------------------------------
Agent
- -----
(a) Any corporation into which the Subscription Agent or any successor
Subscription Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Subscription
Agent or any successor Subscription Agent shall be a party, or any corporation
succeeding to the business of the Subscription Agent or any successor
Subscription Agent, shall be the successor to the Subscription Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In the agency created by this Agreement any
of the Rights Certificates which shall have been printed with the name of the
Subscription Agent but not delivered, any such successor Subscription Agent may
adopt the name of the predecessor Subscription Agent and deliver such Rights
Certificates either in the name of the predecessor Subscription Agent or in the
name of the successor Subscription Agent; and, in all such cases, such Rights
Certificates shall have the full force and effect provided in the Rights
Certificates.
SECTION 17. Duties of Subscription Agent. The Subscription Agent
-----------------------------
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company by its acceptance
hereof shall be bound:
<PAGE>
(a) The Subscription Agent may consult with legal counsel (who may be,
but it is not required to be, legal counsel for the Company), and the written
opinion of such counsel shall be full and complete authorization and protection
to the Subscription Agent as to any action taken or omitted by it in good faith
and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Subscription Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any two of the following: The Chairman of
the Board, the President and the Treasurer of the Company and delivered to the
Subscription Agent; Subscription Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Subscription Agent shall be liable hereunder only for its own
negligence, willful misconduct or bad faith.
(d) The Subscription Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same, but all such statements
and recitals (except the willingness of the Subscription Agent to act as such)
are and shall be deemed to have been made by the Company only.
(e) The Subscription Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Subscription Agent) or in respect of the
validity or execution of any Rights Certificate; nor shall it be responsible for
any breach by the Company of any covenant or condition contained in this
Agreement or in Rights Certificate; nor shall it by any act hereunder be deemed
to make any representation or warranty as to the authorization or reservation of
any Shares to be issued or as to whether any Shares will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Subscription Agent for the carrying out or performing by the Subscription
Agent of the provisions of this Agreement.
<PAGE>
(g) The Subscription Agent and any shareholder, director, officer or
employee of the Subscription Agent may buy, sell or deal in any other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to or otherwise act as
fully and freely as thought it were not Subscription Agent under this Agreement.
Nothing herein shall preclude the Subscription Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 18. Notices to the Company and Subscription Agent. All notices
----------------------------------------------
and other communications provided for or permitted hereunder shall be made by
hand delivery, overnight courier, telex, or facsimile transmission:
(a) if to the Company, to:
Blue Chip Value Fund, Inc.
1225 17th Street - 26th Floor
Denver, Colorado 80202
Attn: Steven Wine
(b) if to the Subscription Agent, to:
ChaseMellon Shareholder Services, L.L.C.
Attn: Lee Tinto, Assistant Vice President
111 Founders Plaza - 11th Floor
East Hartford, CT 06108
All such notices and communications shall be deemed to have been duly
given, when delivered by hand, if personally delivered; the next day after being
sent by overnight delivery, if sent as aforesaid with guaranteed next day
delivery; when answered back, if telexed; and when receipt acknowledged, if
facsimile transmission is used.
SECTION 19. Supplements and Amendments. The Company and the Subscription
---------------------------
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order to cure any ambiguity or
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provision herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Subscription Agent may deem necessary or desirable.
<PAGE>
SECTION 20. Successors. All the covenants and provisions of this
-----------
Agreement by or for the benefit of the Company or the Subscription Agent shall
bind and insure to the benefit of their respective successors and assigns
hereunder.
SECTION 21. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
SECTION 22. Benefits of this Agreement. Nothing in this Agreement shall
---------------------------
be construed to give to any person or corporation other than the Company and the
Subscription Agent any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for sole and exclusive benefit of the
Company and the Subscription Agent.
SECTION 23. Counterparts. This Agreement may be executed in any number of
-------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 24. Description Headings. Descriptive headings of the several
---------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
SECTION 25. Entire Agreement. This Agreement is intended by the parties
-----------------
as a final expression of their agreement and is intended to be a complete and
exclusive statement of this agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
SECTION 26. Force Majeure. If by reason of war or armed hostilities or
--------------
other calamity, act of God or act of any court, government or governmental,
administrative or regulatory authority or agency or similar power beyond the
Company's reasonable control, the Company is prevented or restrained from
completing the transactions contemplated hereby, then the Company and the
Subscription Agent shall have no responsibility for, or obligations with respect
thereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized, as of the
day and year first above written.
BLUE CHIP VALUE FUND, INC.
By:_____________________________________
Name:
Title:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT
CONFIDENTIAL: REORGANIZATION FEE SCHEDULE APPROVAL FORM
ATTN: Steve Wine APPROVED:
FUND: BLUE CHIP VALUE FUND, INC.
Description: Rights Subscription Offering
4,300 Accounts (approximated)
<TABLE>
<CAPTION>
BASICS:
<S> <C> <C>
1. "Good Order" Processing $8.00 per L/T
(includes issuance of one (1) certificate)
2. Defect/Reject $5.00 per L/T
3. Legal $5.00 per L/T
4. Protect $15.00 per L/T
5. Partial/Transfers/Splits $00.50 per L/T
6. Withdrawal N/A per
7. Return/Late Items $2.00 per L/T
8. Excess Debit $00.50 per certificate
PARTICULARS
10. Calculation and Issuance of
Rights Certificate $1.50 per certificate
11. Step-up Privilege $ per L/T
12. Proration (Straight/equally applied)* $3.00 per account
13. Oversubscription $3.00 per account
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SPECIALS
<S> <C> <C>
14. Expiration (applicable on a per basis
which includes each extension)
A. Normal - up to 5:00 p.m. EST $ 600.00
B. Special - 5:00 p.m. to 12:00 p.m. EST $1,200.00
15. Production (in addition to regular production, e.g. Extended List, etc.)
A. Lists negotiable depending upon requirements.
B. Tapes negotiable depending upon requirements.
C. Copies negotiable depending upon requirements.
*Other than a "straight" proration is subject to negotiation.
16. MINIMUM (exclusive of out-of-pocket expenses
and expiration costs) $10,000.00
If applicable, the above mentioned is a minimum for the
first month and subjected to renegotiation thereafter.
-----
</TABLE>
Administrator: Lee Tinto, Assistant Vice President
CMSS - Hartford, CT
(860) 282-3512
<PAGE>
LAW OFFICES
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Telephone: (215) 988-2700
Telex: 834684
Fax: 988-2757
December 18, 1996
Blue Chip Value Fund, Inc.
1225 Seventeenth Street
26th FloorDenver, CO 80202
Re: Registration Statement
----------------------
Gentlemen:
As counsel for Blue Chip Value Fund, Inc., a Maryland corporation (the
"Company"), we have reviewed documents relating to the registration of 2,843,750
shares of Common Stock, par value of $.01 per share (the "Shares"). We have
reviewed the resolutions adopted by its Board of Directors and stockholders and
such other legal and factual matters as we have deemed appropriate for purposes
of this opinion.
Based upon the foregoing, we are of the opinion that the Shares will
be, when issued for payment as described in the Company's prospectus, validly
issued, fully paid and non-assessable by the Company.
We note that W. Bruce McConnel, III, a partner of this firm, is the
Secretary of the Company.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as part of the Company's registration statement relating
to the Shares. However, this action does not constitute a consent under Section
7 of the Securities Act of 1933, because we have not otherwise come within the
categories of persons whose consent is required under Section 7 or under the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ DRINKER BIDDLE & REATH
DRINKER BIDDLE & REATH
<PAGE>
Consent of Independent Auditors
We consent to the use of our report dated January 12, 1996, with respect to the
per share data and ratios contained in the "Financial Highlights" section in the
Registration Statement (Form N-2 Investment Company Act of 1940 No. 811-5003) of
Blue Chip Value Fund, Inc. for each of the five years in the period ended
December 31, 1995 which is incorporated by reference in the Statement of
Additional Information.
We also consent to the reference to our firm under the caption "Financial
Statements" and to references made to us under the caption "Investment Advisory
And Other Services-Independent Auditors" and to the incorporation by reference
of our report dated January 12, 1996 with respect to the financial statements of
Blue Chip Value Fund, Inc. for the year ended December 31, 1995 in the Statement
of Additional Information.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Denver, Colorado
December 17, 1996
<PAGE>
BLUE CHIP VALUE FUND, INC.
POWER OF ATTORNEY
I hereby appoint Kenneth V. Penland or Steven G. Wine attorney for me and
in my name and on my behalf to sign any Registration Statement or Amendment
thereto of BLUE CHIP VALUE FUND, INC. to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on November 17, 1996.
/s/ Robert M. Inman
------------------------
Robert M. Inman
<PAGE>
BLUE CHIP VALUE FUND, INC.
POWER OF ATTORNEY
I hereby appoint Kenneth V. Penland or Steven G. Wine attorney for me and
in my name and on my behalf to sign any Registration Statement or Amendment
thereto of BLUE CHIP VALUE FUND, INC. to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on October 15, 1996.
/s/ Roberta M. Wilson
------------------------
Roberta M. Wilson
<PAGE>
BLUE CHIP VALUE FUND, INC.
POWER OF ATTORNEY
I hereby appoint Kenneth V. Penland or Steven G. Wine attorney for me and
in my name and on my behalf to sign any Registration Statement or Amendment
thereto of BLUE CHIP VALUE FUND, INC. to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on October 14, 1996.
/s/ Richard C. Schulte
________________________
Richard C. Schulte
<PAGE>
BLUE CHIP VALUE FUND, INC.
POWER OF ATTORNEY
I hereby appoint Kenneth V. Penland or Steven G. Wine attorney for me and
in my name and on my behalf to sign any Registration Statement or Amendment
thereto of BLUE CHIP VALUE FUND, INC. to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on October 15, 1996.
/s/ Robert J. Greenebaum
------------------------
Robert J. Greenebaum
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 75,678,195
<INVESTMENTS-AT-VALUE> 103,341,178
<RECEIVABLES> 2,468,005
<ASSETS-OTHER> 28,870
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 105,838,053
<PAYABLE-FOR-SECURITIES> 1,997,940
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 109,597
<TOTAL-LIABILITIES> 2,107,537
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66,812,797
<SHARES-COMMON-STOCK> 10,960,829
<SHARES-COMMON-PRIOR> 10,960,829
<ACCUMULATED-NII-CURRENT> 404,577
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,850,159
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 27,662,983
<NET-ASSETS> 103,730,516
<DIVIDEND-INCOME> 1,172,342
<INTEREST-INCOME> 103,489
<OTHER-INCOME> 0
<EXPENSES-NET> 542,429
<NET-INVESTMENT-INCOME> 733,402
<REALIZED-GAINS-CURRENT> 8,887,835
<APPREC-INCREASE-CURRENT> 1,551,465
<NET-CHANGE-FROM-OPS> 11,172,702
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 328,825
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,843,877
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (37,676)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 319,768
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 542,429
<AVERAGE-NET-ASSETS> 99,230,284
<PER-SHARE-NAV-BEGIN> 8.47
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 0.95
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.46
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 76,298,454
<INVESTMENTS-AT-VALUE> 103,714,522
<RECEIVABLES> 152,879
<ASSETS-OTHER> 9,156
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 103,876,557
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10,989,917
<TOTAL-LIABILITIES> 10,989,917
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66,775,121
<SHARES-COMMON-STOCK> 10,960,829
<SHARES-COMMON-PRIOR> 10,960,829
<ACCUMULATED-NII-CURRENT> 1,392,408
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10,375,112
<OVERDISTRIBUTION-GAINS> 70,176
<ACCUM-APPREC-OR-DEPREC> 26,111,518
<NET-ASSETS> 92,886,640
<DIVIDEND-INCOME> 2,330,326
<INTEREST-INCOME> 89,655
<OTHER-INCOME> 0
<EXPENSES-NET> 1,027,573
<NET-INVESTMENT-INCOME> 1,392,408
<REALIZED-GAINS-CURRENT> 10,375,112
<APPREC-INCREASE-CURRENT> 16,465,643
<NET-CHANGE-FROM-OPS> 28,233,163
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,392,408
<DISTRIBUTIONS-OF-GAINS> 10,412,787
<DISTRIBUTIONS-OTHER> 32,501
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,395,467
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 587,436
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,027,573
<AVERAGE-NET-ASSETS> 90,505,234
<PER-SHARE-NAV-BEGIN> 6.98
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> 2.44
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.08
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.47
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
